Tennesseans may be familiar with the IRS' newest tax filing program that is here to stay

Jordan Green, USA TODAY NETWORK
·4 min read

Direct File from the IRS is here to stay according to an announcement on Thursday.

The IRS' free electronic tax filing system is here and will be available to more taxpayers in 2025. All 50 states and Washington D.C. will have the option to join the permanent program next year.

Tennessee and eleven other states were able to test run the new program from the IRS to help Americans file taxes without extra fees from third party companies. The pilot program was launched this year and saw more than 140,000 taxpayers claim over $90 million in refunds and save an estimated $5.6 million in filing costs.

The IRS expects to make Direct File and option that supports most common tax situations.

What is Direct File from the IRS?

Direct File is a pilot program run by the IRS that's ideal for taxpayers with basic returns. Eligible taxpayers can file directly with the IRS at no cost. Residents in Arizona, California, Florida, Massachusetts, New York, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming were a part of the trial run the IRS put on this year.

Taxpayers using this program can’t itemize deductions, report income from sources such as independent contractor work (Form 1099-NEC), report health insurance gained from HealthCare.gov and certain tax credits can’t be claimed, including retirement plan contributions and higher education expenses. Income restrictions also kick in at $125,000, depending on your filing status.

“As a permanent filing option, Direct File will continue to be one option among many from which taxpayers can choose,” the IRS said in its release. “It is not meant to replace other important options by tax professionals or commercial software providers, who are critical partners with the IRS in delivering a successful tax system for the nation.”

How many people participated in Direct File in Tennessee?

Out of the 12 states participating, five made up a majority of participants. Tennessee wasn't one of them.

Here are the states with the most participants.

  • California: 33,328

  • Texas: 29,099

  • Florida: 20,840

  • New York: 14,144

  • Washington: 13,954

The IRS didn't breakdown the numbers for the other states in an April press release. But doing the math, the other seven states had around 31,000 people participate combined, less than number that participated in California.

How did people respond to Direct File?

Initial testing began in early February 2024 with a handful of federal and state government employees. After a round of final testing in early March, Direct File opened to all eligible taxpayers in pilot states.

“From the very beginning of the Direct File pilot, we wanted to test new ways to give taxpayers an easy, accurate and free way to file their taxes online directly with the IRS,” said IRS Commissioner Danny Werfel. “We saw a strong response from the pilot, and Direct File’s users generally found it fast and easy to use."

A survey done by the IRS had 90% of 11,000 respondents say their experience was excellent or above average. According to the IRS, respondents commented on the ease of use, trustworthiness and that it was free. 86% of the respondents from the survey said it increased their trust in the IRS.

How much did Direct File cost the IRS to run?

Through the end of the pilot, the total amount spent by IRS was $24.6 million, including the Report to Congress. The operational costs, including customer service, cloud computing and user authentication, were $2.4 million.

What is Free File from the IRS?

Though it has a similar name, Free File is a bit different from Direct File.

IRS Free File is a partnership with private tax preparation companies to help low-income Americans file their taxes using guided software for free. Those who don’t qualify can still use the free fillable forms. IRS Free File was criticized for offering too little support or nudging users towards paid products.

It has been around since 2003 and has been used by taxpayers whose adjusted gross income is $79,000 or less. It is estimated that roughly 100 million Americans are eligible.

This article originally appeared on Memphis Commercial Appeal: IRS program Direct File here to stay. Here's how Tennesseans helped