Agency finalizing Direct ob体育 pilot scope, details as work continues this fall; EITC, Child Tax Credit among projected provisions covered
IR-2023-192, Oct. 17, 2023
WASHINGTON — As part of larger transformation efforts underway, the Internal Revenue Service announced today key details about the Direct ob体育 pilot for the 2024 filing season with several states planning to join the innovative effort.
The IRS will conduct a limited-scope pilot during the 2024 tax season to further assess customer support and technology needs. It will also provide a platform for the IRS to evaluate successful solutions for potential operational challenges identified in the report the IRS submitted to Congress earlier this year.
Arizona, California, Massachusetts and New York have decided to work with the IRS to integrate their state taxes into the Direct ob体育 pilot for filing season 2024. Taxpayers in nine other states without an income tax – Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming -- may also be eligible to participate in the pilot. Washington has also chosen to join the integration effort for the state's application of the Working Families Tax Credit. All states were invited to join the pilot, but not all states were in a position to join the pilot at this time.
"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 this limited pilot for 2024, we'll be working closely with the states that have agreed to participate in an important test run of the state integration. This will help us gather important information about the future direction of the Direct ob体育 program."
People in those 13 states may be eligible to participate in the 2024 Direct ob体育 pilot, a new service that will provide taxpayers with the choice to electronically file their federal tax return directly with the IRS for free.
Taxpayer eligibility to participate in the pilot will be limited by the state in which the taxpayer resides and will be limited to taxpayers with certain types of income, credits and deductions – taxpayers with relatively simple returns. The IRS today announced it anticipates specific income types, such as wages on a Form W-2, and important tax credits, like the Earned Income Tax Credit and the Child Tax Credit, will be covered by the Direct ob体育 pilot.
The 2022 Inflation Reduction Act provided the IRS with long-term funding for the agency to transform its operations and improve taxpayer service, enforcement and technology. It also directed the IRS to study the possibility of a free, direct e-file program, which the IRS submitted in a report to Congress in May 2023. Projects like Direct ob体育 represent a goal of the IRS Strategic Operating Plan, to give taxpayers choices in how they interact with the tax agency. This includes choices in how they prepare and file their taxes, whether it's through a tax professional, commercial tax software or free filing options. Direct ob体育 is one more potential option from which qualifying taxpayers will be able to choose to file a 2023 federal tax return during the 2024 filing season.
Since the delivery of the Direct ob体育 report in May – as directed by the Treasury Department – the IRS has been working to develop a pilot for the upcoming filing season, paying special attention to issues identified in the report related to customer support and state taxes. This limited-scale pilot will allow the IRS to evaluate the costs, benefits and operational challenges associated with providing a voluntary Direct ob体育 option to taxpayers.
"We have more work in front of us on this project," Werfel said. "The Direct ob体育 pilot is undergoing continuous testing with taxpayers to identify and resolve issues to ensure its user friendly and easy to understand. We continue to finalize the pilot details and anticipate more changes before we launch for the 2024 tax season. Direct ob体育, if pursued further after the pilot, would be another option eligible taxpayers have to help them prepare their tax returns in addition to existing options such as the use of a tax professional, tax software, Free ob体育 or another option. It's consistent with the IRS mission to make sure taxpayers have available options that work the best for their personal situation."
Direct ob体育 pilot basics
Eligible taxpayers may choose to participate in the pilot next year to file their tax year 2023 federal tax return for free, directly with the IRS.
Direct ob体育 will be a mobile-friendly, interview-based service that will work as well on a mobile phone as it does on a laptop, tablet or desktop computer. The service will be available in English and Spanish for the pilot.
The Direct ob体育 pilot will be a limited, phased pilot. It will not be available to all eligible taxpayers when the IRS begins accepting tax returns. Because the IRS wants to make sure the program works effectively, Direct ob体育 will first be introduced to a small group of eligible taxpayers in filing season 2024. As the filing season progresses, more and more eligible taxpayers will be able to access the service to file their 2023 tax returns.
Direct ob体育 does not replace existing filing options like tax professionals, Free ob体育, free return preparation sites, commercial software and authorized e-file providers. Taxpayers will continue to have choices, whether they want to use a tax professional, a software product, Free ob体育, free tax preparation services like Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) as well as a paper tax return or Direct ob体育.
Taxpayers participating in the pilot will have access to help by IRS employees staffing the Direct ob体育 customer support function. IRS customer service representatives will provide technical support and provide basic clarification of tax law related to the tax scope of Direct ob体育. Questions related to issues other than Direct ob体育 will be routed to other IRS customer support, as appropriate.
Pilot eligibility is limited
Eligibility for the pilot is limited by the types of income, tax credits and deductions that the product can initially support. Taxpayers who fall outside the pilot's eligibility limits will be unable to participate in the pilot in 2024.
Direct ob体育 will cover only individual federal tax returns during the pilot. Also, Direct ob体育 will not prepare state returns. However, once a federal return is completed and filed, Direct ob体育 will guide taxpayers who want to file a state return to a state-supported tool that taxpayers can use to prepare and file a stand-alone state tax return. For the pilot in 2024, where taxpayers may have state or local tax obligations, the IRS will limit eligibility to states that are actively partnering with the IRS on the pilot.
Eligibility to participate in the pilot will be limited to taxpayers who reside in certain states where the pilot is available. Taxpayers in Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming may be eligible to participate in the pilot as their states do not levy a state income tax. Washington has also chosen to join the integration effort as a partner for the state's application of the Working Families Tax Credit. For states that do levy a state income tax, Arizona, California, Massachusetts and New York have chosen to partner with the IRS for the 2024 Direct ob体育 pilot. The IRS anticipates the pilot will be available in those states as well in 2024.
The IRS and the Departments of Revenue in Arizona, California, Massachusetts, New York and Washington entered into separate Memorandums of Understanding in September for the purposes of collaboration on the IRS's Direct ob体育 pilot for filing season 2024.
This approach will test the IRS's ability to successfully integrate with a handful of states and the IRS will continue to work with all states to secure feedback and share what it learns through the course of its work on the pilot.
2024 Direct ob体育 pilot eligibility expected to cover key income, tax credits
Eligibility to participate in the 2024 pilot will be limited to reporting only certain types of income and claiming limited credits and adjustments. The tax scope for the pilot is still being finalized and is subject to change, but the IRS currently anticipates it will include:
Income reporting
- W-2 wage income
- Social Security and railroad retirement income
- Unemployment compensation
- Interest 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
Evaluating the Direct ob体育 Pilot
The purpose of the Direct ob体育 pilot is to test the system the IRS has developed and to learn from that test. This includes testing the technology, customer support, state integration, fraud detection and the overall taxpayer experience. The best way to test a new service offering such as Direct ob体育 is in a limited, controlled environment that will allow the IRS to identify issues and make changes prior to any potential large-scale launch in the future.
The 2024 filing season serves as a pilot for Direct ob体育, and the purpose is to learn about the Direct ob体育 service itself and the needs of taxpayers who use it. By starting with a pilot, the IRS can efficiently learn about Direct ob体育's effectiveness, identify areas of improvement for future iterations and ensure it meets the needs of taxpayers who want to use it.
The IRS will publicly share the results of the pilot when available.
More information will be available at IRS.gov/directfile.