Latest news with #FreeFile
Newsweek
17-06-2025
- Business
- Newsweek
IRS Change Proposed In Senate Finance Bill
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Republican Senators have proposed getting rid of two of the Internal Revenue Service's free tax filing programs, which allow millions of Americans to file their taxes free of charge. The Senate Committee on Finance has unveiled its amendments to the One Big Beautiful Bill Act, which was approved by the House of Representatives in May. It includes a proposal to "terminate" the IRS Direct File, as well as investigating whether that and the Free File program could be replaced. Why It Matters The Associated Press reported earlier this year that the Trump administration plans to end the Direct File program, which is only in its second year. In February, former Department of Government Efficiency head Elon Musk said he had "deleted" an arm of the General Services Administration, known as 18F, which helped build and run the program, as part of his sweeping cutbacks across federal agencies. What To Know IRS Direct File is available in 25 states and allows taxpayers with relatively simple tax returns to file without the need for a third party. According to the IRS, some 30 million taxpayers were eligible to use Direct File to file 2024 federal tax returns during the 2025 tax filing season. Stock image/file photo: Internal Revenue Service sign at the IRS Building in Washington, DC in March 2018. Stock image/file photo: Internal Revenue Service sign at the IRS Building in Washington, DC in March 2018. GETTY Free File helps taxpayers with adjusted gross income under $84,000 per year file federal income tax returns online using guided tax preparation software. The proposals include a provision that would direct the Treasury Department to "terminate the current Direct File program at the IRS," as well as "author a report evaluating the establishment of a public-private partnership between the IRS and private sector tax preparation services to offer free tax filing, potentially replacing both the existing Direct File and Free File programs." Direct File has only been running for two years and was piloted in 12 states in 2024 for the 2023 tax season. The IRS described the initial launch as a success, with 140,803 taxpayers using it in its inaugural year and more than 3.3 million taxpayers across all states using the eligibility checker. It was later expanded to 25 states for the 2024 season. No information is publicly available for how many used the service this year. Newsweek has contacted the IRS via email for the figures. Democrats have previously expressed concerns over ending the program. A letter signed by approximately 200 lawmakers was sent to Treasury Secretary Scott Bessent in April of this year, requesting that the program be extended for the 2025 tax year. While the program is designed to help lower tax preparation costs for Americans, it has attracted some criticism. In May 2024, Tania Mercado, spokesperson for TurboTax's parent company Intuit, told Newsweek that the program is "a solution in search of a problem and every American can already file their taxes for free, without any cost to the government or taxpayers." What People Are Saying Democratic lawmakers in their letter to Bessent: "Ending this free, easy-to-use, and popular program would be an insult to American taxpayers, eliminating an important alternative to commercial options provided by the tax prep industry." Mercado, speaking to Newsweek in February 2024: "Direct File is not free tax preparation, but rather a thinly veiled scheme where billions of taxpayer dollars will be unnecessarily used to pay for something already completely free of charge today." What Happens Next No date has been given for when the termination of Direct File could begin. The Senate is looking to pass its amendments on the bill by Independence Day—July 4—at which point it would return to the House for a final vote before being signed by the president.
Yahoo
09-06-2025
- Business
- Yahoo
Fifteen years after shuttering its tax-prep app, Va. may be ready to compete with TurboTax again
A Resident Individual Income Tax Return form for Virginia residents. (Photo courtesy Virginia Tax) The Virginia Department of Taxation's website parts company with the web presences of other agencies in the commonwealth: It doesn't offer its own tools to help you complete your primary task there — taxes. While you can renew a car registration at the Department of Motor Vehicles site and register an LLC at the State Corporation Commission's site, Virginia Tax doesn't let you file your state income taxes online and instead points you to commercial tax-prep services. That's not because Virginia Tax hasn't developed its own filing app. It's because 15 years ago, the department shelved the iFile app that had already drawn more than 278,000 users in 2009. In 2010, then-Gov. Bob McDonnell, a Republican, signed a bill patroned by Del. Kathy Byron, R-Lynchburg, which had Virginia retire iFile and cede tax preparation to private providers that would offer apps for free to lower-income residents – the same proposition the Internal Revenue Service accepted in 2002. That removed a free option from higher-income taxpayers, with Intuit's market-leading TurboTax charging a state tax-prep fee that now stands at $64, despite the relative simplicity of the state's Form 760. Most other commercial tax-prep services charge for state filing, although Cash App Taxes does not. 'We should not have to pay a for-profit company in order to file our taxes easily,' Del. Kathy Tran, D-Fairfax, said after reviewing a constituent's complaints. But even taxpayers eligible to use Free File, historically around 70% of total users, have largely ignored it. In 2024, Virginia Tax processed 89,064 Free File individual returns – far fewer than the 4,128,006 total individual returns received electronically or the 446,782 filed on paper. Electronic returns cost 10 cents each to process and paper ones cost $5.96 each, Heather Cooper, Virginia Tax's director of communications and training, confirmed in an email. At the federal level, the IRS has downgraded from the Free File partnership. Pro Publica's coverage of how Intuit had made its Free File options hard to find online led to the IRS altering its Free File arrangement in 2019 to drop that deal's prohibition on competing with commercial tax-prep apps, and the IRS has now offered its Direct File app for two tax seasons in a row. Vanessa Williamson, senior fellow at the Urban-Brookings Tax Policy Center, called its popularity among users 'remarkable' — 74% of 440 respondents in a survey done after the 2023 tax-year filing season said they preferred it over other filing methods. 'The success of Direct File should be a model for the states,' she said. Virginia has not been among the 25 states supporting Direct File, but it may now be ready to reverse its own Free File decision — even as the Trump administration appears intent on scrapping Direct File. Two years after Tran introduced a bill to revive iFile that died in committee, the delegate sponsored a similar bill this year that would also have Virginia join Direct File. That one, with a companion measure sponsored by Sen. Jeremy McPike, D-Prince William, passed the General Assembly only to meet a veto from Republican Gov. Glenn Youngkin. Youngkin's veto message cited 'uncertainty' about Direct File's fate and also noted another recent advance towards returning Virginia to online filing: budgetary language requiring Virginia Tax's next revenue-management system to support 'an electronic filing system for individual income tax that can be used by all Virginians.' We should not have to pay a for-profit company in order to file our taxes easily. – Del. Kathy Tran, D-Fairfax Tran suggested that wording in the budget could be enough to accomplish her bill's goal, depending on how Virginia Tax interprets it. That interpretation could rely on who the next governor appoints to her cabinet, but the two presumptive candidates, former Democratic congresswoman Abigail Spanberger and Republican Lt. Gov. Winsome Earle Winsome-Sears, have not spoken out on this issue. A query to each campaign's press office went unanswered. Intuit questioned the need for a public tax-prep app. 'Free filing options for state tax preparation are already available today,' spokesperson Tania Mercado said. 'Filing federal and state taxes together and linking tax returns allows taxpayers to save time, ensure accuracy, improve privacy and data protection, and reduce the chances of tax refund fraud.' Opponents of direct filing also question whether public-sector developers would have the same motivations as private-sector counterparts. 'Additionally, the private sector would have an incentive to find as much savings as possible for taxpayers when preparing their taxes,' Americans for Tax Reform said in a 2010 statement commending Virginia joining Free File. Tran's reply: Nobody is banning commercial tax apps. 'Having a direct free file way for you to pay your taxes is not a requirement for you to use that option,' Tran said. 'That is a decision you as a taxpayer get to make.' In Maryland, the free iFile tax-prep app the state has offered since 2001 drew relatively few users this year: 39,717 returns out of more than 2.6 million submitted electronically, a little over half of the 76,918 paper returns handled as of early May, officials said. Almost 6,000 more returns came in via Maryland's Direct File portal using an interface developed by Code for America, Robyne McCullough, media relations director at the Maryland comptroller's office, said by email. When Maryland launched that partnership, officials estimated that almost 700,000 Marylanders would be eligible to use Direct File. But Maryland taxpayers have that choice, while Virginians do not. 'The thing preventing us from having a high-quality, free public tax preparation system is not technology or logistics, it's just politics,' said Williamson, the Urban-Brookings Tax Policy Center fellow.
American Military News
29-05-2025
- Business
- American Military News
IRS Direct File will be cancelled if Republican tax bill becomes law
The $3.8 trillion Republican tax bill that just passed the House includes a provision to kill off the popular IRS Direct File program, which lets people file their federal income tax returns for free online. The bill still needs to pass the Senate to become law, but if the bill is enacted as currently written, the Direct File program is slated to be eliminated within 30 days of the law's passage. The bill also requires the U.S. Treasury Department to create a task force to design a partnership between the IRS and private-sector tax service providers. The task force would need to identify ways to replace any 'free file programs and direct e-file tax return systems.' That includes the IRS Free File program, an existing public-private partnership. IRS Direct File, which is separate from the Free File program, is a popular free option that offers guidance and support as you fill out your federal income tax return and file your taxes directly with the IRS. Most taxpayers have rated the Direct File program positively: About 90% of taxpayers said their experience was excellent or above average, according to a survey by the General Services Administration of about 11,000 Direct File users in 2024. On top of that, interest in the program is clear: About 73% of taxpayers said they'd be somewhat or very interested in using Direct File, according to a Tax Policy Center report in March, based on a survey of taxpayers aged 18 to 64. The Direct File program has been in Republican lawmakers' crosshairs for a while. In December, almost 30 Republican lawmakers sent a letter to President-elect Donald Trump, calling for him to end the Direct File program on his first day in office. Lawmakers in the U.S. House of Representatives introduced legislation last July to end the Direct File program. Elon Musk, de facto head of the 'Department of Government Efficiency,' or DOGE — also isn't a fan of the program. In February, he posted on social media that the government tech office that developed the Direct File program had been 'deleted.' Currently, the IRS's Direct File page is still up and running. Direct File doubled its reach to 25 states for the 2025 tax season, up from 12 states in 2024, the program's pilot year. An estimated 30 million taxpayers qualify for the Direct File program in 2025, the IRS says. More than 140,000 taxpayers filed their federal tax returns through the Direct File program in 2024. The Direct File program also expanded to accept more types of tax situations for the 2025 tax season. While taxpayers who used the system in 2024 could claim a handful of tax credits, including the earned income tax credit and the child tax credit, that list expanded for this filing season to include the child and dependent care credit, among others. However, taxpayers who want to claim other tax credits, such as the American Opportunity Tax Credit for higher education costs, or the tax credit for the costs of adopting a child, won't qualify for Direct File. And if you're hoping to deduct IRA contributions, Direct File doesn't support that. (See the full list of credits and deductions supported by Direct File on this IRS page.) The Direct File program, now in its second year, allows taxpayers to file their federal tax returns electronically with the IRS. The no-cost tool guides taxpayers through every part of their federal income tax return. Taxpayers can file using a smartphone, computer or tablet. One of the program's advantages is that, if you have questions as you're working on your return, you can get live support directly from the IRS via chat or phone. IRS representatives can answer basic tax questions and help with technical issues in English and Spanish. The Direct File program has income limits, as well as limits on the types of income, deductions and credits you can enter on your tax return. For the 2025 tax season: —Your income must be less than $200,000 (less than $168,600 if you have more than one employer), and if you're married filing jointly, your spouse's income also must fall below these limits. —If you're married filing jointly, your combined income must be less than $250,000. —If you're married and file separately from your spouse, your income must be less than $125,000. To be eligible for Direct File, your income can come from the following sources: —W-2 wages —Social Security income —Unemployment compensation —Interest income —Retirement income (reported on a 1099-R — limited eligibility starts March 2025) But if you're self-employed, or have business or rental income, you can't use Direct File. Same goes for IRA contributions or distributions: If you have either, you can't use Direct File. You can use the IRS Direct File program only if you claim the standard deduction — the program isn't available to people who itemize. But you can claim certain above-the-line deductions: student loan interest, educator expenses and health savings account contributions. You can't use Direct File if you want to deduct your IRA contributions. The Direct File program supports the following tax credits in 2025: —Earned income tax credit —Child tax credit —Credit for other dependents —Child and dependent care credit —Premium tax credit —Credit for the elderly or disabled —Retirement savings contribution credit However, if you want to claim education credits, credits for energy efficient home upgrades or the adoption expense credit, you can't use the Direct File program. More taxpayers will have access to the IRS Direct File program in 2025. In 2024, the IRS kicked off the program with only 12 states; that number has expanded to 25 states for the 2025 tax season. For some of the states that participate in the IRS Direct File program, your federal return information will be transferred automatically to the state tax website, but in some cases you'll have to re-enter your information. Visit this IRS Direct File page to get the details for your state. Here is a list of the participating states: Alaska, Arizona, California, Connecticut, Florida, Idaho, Illinois, Kansas, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming If you don't qualify for the IRS Direct File program, you may have other options to file your tax return for free. In addition to Direct File, the IRS offers the Free File program, in which it partners with online tax software providers to provide free federal income tax return filing. Some providers also allow you to file a state income tax return. For the 2025 tax season, your adjusted gross income must be $84,000 or less to qualify for the Free File program. That AGI applies to any filing status: married filing jointly, single, head of household, etc. The IRS also offers the Volunteer Income Tax Assistance (VITA) program, which provides certified volunteers to prepare basic tax returns if you earn less than $67,000 a year, are disabled, or speak limited English. You can find a site near you by visiting this IRS page. ___ © 2025 Distributed by Tribune Content Agency, LLC.
Yahoo
30-04-2025
- Business
- Yahoo
Here's Why the IRS Makes You Calculate Your Own Taxes in 2025
America's tax code can be a rather tricky one, making the process of doing your taxes seem incredibly laborious — not to mention expensive. Year after year, taxpayers have to make their way through the complicated and costly tax system to discover whether they are owed a refund or owe the federal government taxes. Find Out: Try This: Ever wonder why you have to file a complicated return at all? Forty years ago, in 1985, then-President Ronald Reagan pressed for an American tax system that would be 'return-free,' predicting that over 50% of taxpayers wouldn't file at all — any taxpayer with a basic return would simply receive their refund or a letter notifying them of any taxes owed to the federal government. Only taxpayers who chose to file their own taxes — which they could initially choose to do or choose because they disagreed with their amount refunded or owed — or who had more complicated returns would file the way all taxpayers currently do. Check Out: Additionally, chief economist for President Barack Obama Austan Goolsbee pushed in 2006 for a 'simple return,' in which taxpayers would actually receive a completed tax form from the government and would only be asked to review the form for any errors. Goolsbee argued this would save taxpayers at least $2 billion in tax preparation fees. Those tax preparation fees, though, are exactly why taxpayers are required to continue filing the more complicated way, per the Nebraska Examiner, which stated that the commercial tax preparation industry continually lobbies Congress to keep the American tax system the way it is. Although there are free tax filing options — the IRS Free File program, for one, which partners with public tax preparation services — the government made a deal with the commercial tax preparation industry in 2002 to not compete in the tax prep market and not release a free tax preparation system, the Nebraska Examiner reported. In 2007, the House of Representatives struck down legislation that would have enacted free government tax prep for taxpayers. In 2019, Congress attempted — but failed — to block the IRS from creating free online tax preparation. Time and time again, the private sector tax preparation industry has fought for survival by lobbying Congress not to impede upon its commercial territory, arguing they prevent tax mistakes and tax evasion. With the current complicated tax system, the private-sector tax preparation industry keeps itself necessary for taxpayers confounded by America's laborious tax code. More From GoBankingRates6 Reasons Your Tax Refund Will Be Higher in 2025 7 Tax Loopholes the Rich Use To Pay Less and Build More Wealth The New Retirement Problem Boomers Are Facing Sources National Archives, 'Address to the Nation on Tax Reform.' The Hamilton Project, 'The Simple Return Reducing America's Tax Burden Through Return-Free Filing.' Nebraska Examiner, 'The IRS already has all our income tax data — so why do we still have to file taxes?' This article originally appeared on Here's Why the IRS Makes You Calculate Your Own Taxes in 2025
Yahoo
17-04-2025
- Business
- Yahoo
Citizens Against Government Waste Names Sen. Elizabeth Warren April 2025 Porker of the Month
WASHINGTON, April 17, 2025--(BUSINESS WIRE)--Today, Citizens Against Government Waste (CAGW) named Sen. Elizabeth Warren (D-Mass.) its April 2025 Porker of the Month for her efforts to expand the Internal Revenue Service's (IRS) Direct File system to prepare and collect everyone's taxes. Direct File is duplicative, costly, and dangerous. It not only competes with the IRS's Free File system that gives taxpayers the ability to use private sector programs but also is limited and ineffective since it cannot be used for state income tax returns and taxpayers were unable to claim education tax credits. In December 2024, the IRS estimated that Direct File would cost $24.6 million and be used by at least 2.3 million taxpayers. But a March 20, 2025, Treasury Inspector General for Tax Administration report said it cost $33.4 million and only 104,800 returns out of 423,450 filed were accepted. Direct File was also set up without any statutory authority. CAGW President Tom Schatz said, "Sen. Warren's push to expand the duplicative and wasteful Direct File program shows her complete disregard for protecting taxpayer dollars and information. Only taxpayers know their personal financial situation, but Direct File is allowing the IRS to become the preparer, biller, and enforcer of everyone's taxes. Filing taxes is already difficult and stressful enough for taxpayers. Sen. Warren should be ashamed of her proposal that will waste money and harm taxpayers across America. For her efforts to expand the size and scope of the IRS's power and take away personal control, Sen. Warren was an easy choice for this month's Porker." Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government. For more than two decades, Porker of the Month is a dubious honor given to lawmakers and government officials who have shown a blatant disregard for the taxpayers. View source version on Contacts Alexandra Abrams (202) 467-5310aabrams@
