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Forbes
15-07-2025
- Business
- Forbes
The One Big Beautiful Bill Act Didn't Kill IRS Direct File But It Sure Feels Like It
NORTH HALEDON, NJ - APRIL 15: In this photo illustration, a 1040 U.S. Individual Income Tax Return document is seen on a desk on April 15, 2024 in North Haledon, New Jersey. (Photo illustration by) Getty Images Direct File is officially dead—at least that's the sense coming out of the IRS at the moment. A recent IRS press release reminds taxpayers who requested an extension that 'IRS Free File makes it easy.' That feels… innocuous, right? But the mention of Free File in the (very) brief 123-word press release, without referencing Direct File, which also remains open through October 15, 2025, suggests that the IRS is already ready to turn the page on the program. Free File is an existing program offered as part of a public-private partnership between the IRS and Free File Inc., formerly the Free File Alliance. Through this partnership, tax preparation and filing software providers make their online products available to eligible taxpayers (as compared to Direct File, an IRS program). Free File debuted in 2003, but not without controversy. It was developed to provide free e-filing services to most taxpayers, with the goal of helping the IRS meet the 80% e-file target established by the Restructuring and Reform Act of 1998. At the time, many wondered why the federal government partnered with the private tax prep industry instead of creating its own software. In 2002, Treasury Secretary Paul O'Neill made it clear to then IRS Commissioner Charles Rossotti that the agency should partner with the private sector. As a result, the government entered into a memorandum of understanding pledging not to enter the tax return software and e-file services marketplace. You'd assume taxpayers would flock to e-file for free. The e-file market did explode, but not necessarily for free services, leading to allegations that some providers were directing taxpayers to paid services. In 2019—the last year the Free File agreement was signed—up to 100 million taxpayers, or 70% of filers, were eligible to use Free File. The actual use was closer to 3%. In 2016, then-Forbes staffer Sam Sharf wrote an account of how, despite qualifying to file for free, it cost her $118.64 to file her 2014 tax return with TurboTax. A few years later, ProPublica wrote a series of articles focusing on the lengths to which it claims tax software companies went—such as extensive lobbying and hiding free options—to get taxpayers to pay for services. In April 2019, ProPublica noted, "Intuit has changed the code on its Free File page so that the actually free version of TurboTax is no longer hidden from Google and other search engines." H&R Block was also accused of purposefully steering taxpayers away from free products. The allegations created quite a stir—and resulted in litigation. Today, tax preparation software companies are prohibited from hiding free filing services from Google or other search results pages. Additionally, if you can't file for free after visiting a company's Free File website, you must be able to return to the Free File website to find another offer. Each IRS Free File company must provide information when you don't qualify, with a link to the Free File site. Following the changes, two traditional Free File participants, Intuit and H&R Block, opted out of the program. Eight private-sector Free File partners provided online guided tax software products in 2025: 1040Now, EzTaxReturn, FreeTaxUSA, OnLine Taxes, TaxAct, and TaxSlayer. Direct File The controversial Direct File program allows eligible taxpayers to file taxes directly with the IRS online for free. The word "controversial" is a nod to the fact that while the IRS touts the program as beneficial to taxpayers and says the initial feedback was overwhelmingly positive, some Republicans in Congress weren't happy with the program. As part of the Inflation Reduction Act, Congress tasked the IRS with delivering a report on, among other things, the cost of developing and running a free direct e-file tax return system. The report was to include he costs to build and administer each release, with a focus on multi-lingual and mobile-friendly features and safeguards for taxpayer data. The IRS released the report to Congress in May 2023. According to the report, most taxpayers surveyed by the agency had interest in using an IRS-provided tool to prepare and file their taxes. At the time, the IRS indicated it hoped to make that a reality for some taxpayers for the 2024 tax filing season. When the tax filing season opened in January 2024, the IRS announced a limited-scope pilot of Direct File, which it claimed would allow the IRS to evaluate the costs, benefits, and operational challenges associated with providing the option to taxpayers. The pilot, the IRS claimed, was a success. The tax agency said that Direct File users reported a high degree of satisfaction and quick answers to their filing questions. In a GSA Touchpoints survey of more than 11,000 Direct File users, 90% of respondents ranked their experience with Direct File as "Excellent" or "Above Average." Most survey respondents who filed taxes in the prior year reported having to pay to prepare their taxes last year. Among survey respondents, 47% of users paid to file their taxes last year, and 16% did not file last year at all. When asked what they particularly liked, respondents most commonly cited Direct File's ease of use, trustworthiness, and that it was free. According to the IRS, taxpayers filed—for free—to obtain more than $90 million in refunds and saved an estimated $5.6 million in filing costs. (You can read what some taxpayers had to say to Forbes about their experiences here.) After the first year, the Treasury Department declared that Direct File would be a permanent, free tax filing option. The IRS also expanded the program in 2025 to include more states and the ability to handle a wider range of income, credits, and deductions. 2025 Brought More Changes To Direct File The free tax software program had been marked as safe for the 2025 season, with now-Treasury Secretary Scott Bessent committing to the program during his confirmation hearing. "I will commit that for this tax season … Direct File will be operative," Bessent said. However, less than 48 hours after the end of the regular tax filing season, reports flew that the program would be axed. That was confirmed in May when the House version of what is now the One Big Beautiful Bill Act (OBBBA) included a provision to eliminate IRS Direct File. The original language directed Treasury to ensure that the IRS Direct File program has been "terminated" no later than 30 days after the bill became law. That bit didn't survive. But OBBBA does include a provision creating a task force to deliver a report on the 'cost of enhancing and establishing public-private partnerships which provide for free tax filing for up to 70 percent of all taxpayers calculated by adjusted gross income, and to replace any direct e-file programs run by the Internal Revenue Service.' The task force is also tasked with taking the pulse of the public on 'opinions and preferences regarding a taxpayer-funded, government-run service or a free service provided by the private sector.' The amount of money earmarked is $15,000,000. If you're feeling a bit of deja vu, you're not wrong. The Inflation Reduction Act of 2021—the law that led to the creation of Direct File—also established a task force to design a direct file tax return system. The task force was required to explore the "(I) the cost (including options for differential coverage based on taxpayer adjusted gross income and return complexity) of developing and running a free direct efile tax return system, including costs to build and administer each release, with a focus on multi-lingual and mobile-friendly features and safeguards for taxpayer data; (II) taxpayer opinions, expectations, and level of trust, based on surveys, for such a free direct efile system; and (III) the opinions of an independent third-party on the overall feasibility, approach, schedule, cost, organizational design, and Internal Revenue Service capacity to deliver such a direct efile tax return system." The cost? Also $15,000,000. Last Gasps From Congress Not everyone is giving up on the program. U.S. Rep. Emilia Sykes (D-Ohio) has introduced legislation to not only save, but expand, the program. The legislation, called the 'Get Your Money Back Act,' would fully reinstate the Direct File program, while requiring states to opt in to the service. 'For many, the tax filing season can be time-consuming, expensive, and confusing, even though most taxpayers have relatively simple returns, which is why the Direct File program was both effective and popular,' said Sykes in a statement. 'Unfortunately, even before the Treasury Secretary ended the program, Ohioans weren't able to take advantage of this program because our state's government never opted in. My legislation would implement this successful program nationwide, improving everyone's experience with tax season.' Sykes officially introduced the legislation on June 30, 2025. It has since been referred to the House Committee on Ways and Means. There has been no additional action to date. Forbes Trump Administration Will Reportedly Nix IRS Direct File, Eliminating The Free Tax Filing Option By Kelly Phillips Erb Forbes House Tax Plan Would Kill Direct File And Rescue Controversial Contingency Fees By Kelly Phillips Erb Forbes IRS Announces Direct File Program Will Be Available In Twice As Many States In 2025 By Kelly Phillips Erb
Yahoo
27-01-2025
- Business
- Yahoo
2024 tax filing: How to Direct File, 1099-K reportings, and other things to know
The Brief The IRS will begin processing 2024 tax returns on Jan. 27. The last day you can file your 2024 taxes without requesting an extension is Tuesday, April 15, 2025. Gig workers who earned more than $5,000 in payments in 2024 will receive a Form 1099-K PDF in January 2025. Another tax filing season is upon us. The IRS announced Monday, Jan. 27, as the official beginning of the tax filing season. Here are other key dates and important things to know about this year's filings: Direct File is a web-based service that works on mobile phones, laptops, tablets or desktop computers. It guides taxpayers through a series of questions to prepare their federal tax return step-by-step. Direct File is open now to eligible taxpayers in 25 states to file their taxes directly with the IRS for free. States include: 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. For more information or to check your eligibility, visit IRS Free File is also available, which offers free tax preparation software from eight companies in the public-private partnership between the IRS and Free File Inc. For 2024, the Child Tax Credit is worth up to $2,000 for each qualifying child. A child must be under age 17 at the end of 2024 to be a qualifying child. Find more info from the IRS here. If you're a freelancer or gig worker who receives payments via apps like Venmo, Zelle, Cash App or PayPal, your tax reporting requirements will change for the 2024 tax year. The law will not affect the amount of taxes owed, but it will change how you report income with 1099-K forms. Those who received more than $5,000 in payments for goods and services through an online marketplace or payment app in 2024 should expect to receive a Form 1099-K PDF in January 2025. A copy of this form will be sent to the IRS as well. The 1099-K reporting threshold will eventually decrease to $600. Timeline Several factors can influence the timing of a refund after the IRS receives your tax return. Most refunds are issued in less than 21 days, but the IRS advises taxpayers not to depend on the refund for major purchases or bills. Filing electronically and selecting direct deposit remains the fastest and safest way for taxpayers to receive their 2024 tax refunds, according to the IRS. Taxpayers can check a refund's status by using the Where's My Refund? Tool online. Timeline The last day you can file your 2024 taxes without requesting an extension is Tuesday, April 15, 2025. Some taxpayers affected by recent natural disasters get extra time to file. For example, victims in parts of Virginia that were affected by Hurricane Helene beginning Sept. 25, 2024 have until May 1, 2025 to file their federal tax returns. RELATED: 2025 tax brackets: Key changes to know as filing season approaches By the numbers Tax brackets for single individuals: The IRS is increasing its tax brackets by about 2.75% for both individual and married filers across various income levels in tax year 2025: 10%: Taxable income up to $11,925 12%: Taxable income over $11,925 22%: Taxable income over $48,475 24%: Taxable income over $103,350 32%: Taxable income over $197,300 35%: Taxable income over $250,525 37%: Taxable income over $626,350 Tax brackets for joint filers: 10%: Taxable income up to $23,850 12%: Taxable income over $23,850 22%: Taxable income over $96,950 24%: Taxable income over $206,700 32%: Taxable income over $394,600 35%: Taxable income over $501,050 The Source Information in this article was taken from various FAQ pages of the IRS' official government website. This story was reported from Detroit.
