The Internal Revenue Service is rolling out its free electronic tax-filing system in 12 states, including California, ahead of the 2023 tax-filing season.
According to the agency, the in-house filing system will first be available in 12 states as it undergoes final testing before expanding it nationwide at a later date.
“As our transformation efforts take hold, taxpayers will continue to see marked improvement in IRS operations in the upcoming filing season,” IRS Commissioner Danny Werfel said. “IRS employees are working hard to make sure that new funding is used to help taxpayers by making the process of preparing and filing taxes easier.”
For now, Direct File will only accept federal tax returns, but the IRS will redirect taxpayers to submit their state's supported tool (if any) if they wish to file a state return.
The new filing tool is different from the IRS existing Free File program, which allows taxpayers whose income is less than $79,000 to file their taxes for free through participating brand name software. Direct File is open to everyone regardless of income.
Ahead of the launch of the 2023 tax season on Monday, Jan. 29, here's everything you need to know about Direct File.
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What are the requirements for Direct File?
If you report any of these items on your tax return, the IRS says you are able to use their free filing tool:
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- SSA-1099 Social Security and RRB -1099 railroad retirement income
- W-2 wage income
- 1099-G Unemployment compensation
- 1099- INT Interest income of $1,500 or less
Taxpayers who also claim credits like the Earned Income Tax Credit, Child Tax Credit or Credit for Other Dependents are also able to file and claim these benefits using the tool, the IRS said.
Deductions such as the Standard deduction, Student loan interest and Educator expenses are also able to be claimed via Direct File.
How does Direct File work?
The agency said Direct File will have a step-by-step checklist approach to filing that will allow taxpayers to go through their returns smoothly.
The tool will also have interactive icons on each screen to help answer common questions, but it will also offer live assistance directly from an IRS Direct File customer service representative if needed.
Once the filing is done, Direct File will show taxpayers a summary of their 2023 federal taxes before sending an email confirmation of the submission, and another email when the IRS accepts your return for processing.
The IRS will then ask users if they want to file state tax returns and redirect them to CalFile, California's free tax filing tool for state tax returns.
Direct File does not require any software installation or purchase. It's also mobile-friendly, so users will be able to file their tax returns on a phone or tablet as well as through a computer.
The tool is available in English and Spanish.
How does CalFile work?
Taxpayers with an adjusted gross income of up to $237,035 ( for single or married but filing separately) qualify to use CalFile. The income limits increase to $305,016 for heads of household, and to $406,687 for married couples filing jointly or qualifying widow(er).
If you want to use CalFile, you must also be filing an original 2023 return, have lived in California the entire year, and are claiming no more than 10 dependents.
Educators are not able to use CalFile if they seek to claim more than $250 in educator expenses.
What do you need to use the tool?
For a complete list of qualifications and to register for the tool, visit CalFile's website here.
How can I use Direct File?
To use Direct File, eligible taxpayers will need to create an IRS account and verify their identity via the ID.me tool.
To verify your identity, the IRS will ask you to provide a driver's license, state ID, passport, or passport card as well as to take a photo of yourself using a smartphone or upload an image of your selected document.
Taxpayers may choose to verify their identity via live chat to bypass automated biometric collection.
When can you start filing tax returns?
The IRS announced it will officially begin accepting and processing 2023 tax returns on Monday, Jan. 29.
When is the tax filing deadline this year?
The federal deadline for filing 2023 tax returns is April 15 for most filers. However, deadlines vary for state tax returns.
The IRS expects more than 128.7 million people to file individual tax returns this year.
