In 2024, the IRS launched Direct File – a new pilot program that will allow eligible filers in 12 states to file their federal taxes for free directly with the IRS.

The new program is funded by the Inflation Reduction Act of 2022, and will allow the IRS to evaluate the costs, benefits, and challenges associated with providing a free tax filing service comparable to existing commercial software.

The 2024 tax season will see a phased roll out plan, so it won't be available to all taxpayers immediately.

Keep reading to see who qualifies for IRS Direct File and how it works.

What is Direct File?

Direct File is a new tax tool to file federal taxes directly with the IRS. The online offering is currently available as a pilot to a limited number of taxpayers and is available in both English and Spanish.

You can find the Direct File pilot via the IRS website.

How much does Direct File cost?

IRS Direct File is free of charge. However, since IRS Direct File does not file state returns, taxpayers required to file a state tax return will be directed to state-supported tool after completing their federal tax return. This will include users living in Arizona, California, Massachusetts, and New York.

How does Direct File work?

Direct File is available to access online via desktop, a smartphone, or tablet. Those eligible will follow a step-by-step checklist that guides you through the filing process and helps you easily track your progress.

Live online support will be available for technical assistance, but users will not be able to use this function to receive tax advice.

Read more: How to reduce taxable income

When can I use Direct File?

The IRS is rolling out Direct File in phases and it is not available to the public just yet. As of January 2024, access to Direct File is limited to a small number of taxpayers, though the IRS expects it to become more widely available by mid-March¹.

The IRS has yet to announce when Direct File will become available for everyone. The pilot is a chance for the agency to learn from taxpayers who use Direct File and determine how to improve the experience.

Who is eligible for Direct File?

You may be eligible to file your taxes via Direct File this year if you live in one of the participating states and you report these items on your 2023 federal tax return:

Income

• W-2 wage income
• SSA-1099 Social Security income 
• 1099-G unemployment compensation
• 1099- INT interest income of $1,500 or less

Credits

• Earned Income Tax Credit
• Child Tax Credit
• Credit for Other Dependents

Deductions

• Standard deduction
• Student loan interest
• Educator expenses

Which states are participating in Direct File?

The 12 states participating in the Direct File are those which either don’t have a state income tax or have a state-supported tool to file state income taxes.

 The Direct File pilot will be available to eligible participants in these states:

• Arizona
• California
• Florida
• Massachusetts
• Nevada
• New Hampshire
• New York
• South Dakota
• Tennessee
• Texas
• Washington state
• Wyoming

The pilot is not an option for you if you did not live in one of the 12 participating states in 2023.

Can I file my state tax return with Direct File?

Direct File is only available for filing federal taxes. Eight of the participating states — Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — don’t have a state income tax. The IRS has partnered with the remaining four states that do have state income tax to route tax filers to a state-supported tool once their federal return has been filed.

Who is ineligible for Direct File?

During the pilot phase, IRS Direct File is not available for anyone who does not file taxes in one of the 12 participating states or those with complex tax return. Taking part in the pilot program is not an option if you:

• Have other types of income, such as gig economy or business income
• Itemize deductions
• Claim other credits like the Child and Dependent Care Credit, Saver's Credit, or the Premium Tax Credit

How is IRS Direct File different from IRS Free File?

Both IRS Direct File and IRS Free File are free tax filing services offered by the IRS, but with some key differences.

IRS Free File is a partnership between the tax agency and several commercial tax software providers. This service has its own eligibility rules based on age, income and state residency. Taxpayers must have an adjusted gross income (AGI) of $79,000 or less in 2023 to use IRS Free File.

On the other hand, Direct File has no income limits, but since the service is a pilot program it is limited to a small number of eligible taxpayers for the time being.

Read more: How to calculate your adjusted gross income (AGI)

The bottom line

The IRS Direct File pilot is intended to offer a range of benefits for taxpayers, including free federal tax return filing, step-by-step guidance, and real-time online support from IRS agents.

"This is a critical step forward for this innovative effort that will test the feasibility of providing taxpayers a new option to file their returns for free directly with the IRS," said IRS commissioner Danny Werfel in an Oct. 17, 2023 press release².

To confirm if you are eligible to file your federal taxes via Direct File, and to follow along with any updates, visit the IRS website.