IRS will make 'Direct File' program permanent, Treasury confirms

The Internal Revenue Service (IRS) will make its "Direct File" tax program permanent following the implementation of a pilot program this year.

“We’re making Direct File — the new product we piloted this year — permanent,” Treasury Secretary Janet Yellen said Thursday, according to The Hill.

The Direct File program permitted users to file only their federal tax returns and did not allow for the filing of state returns. IRS Commissioner Daniel Werfel, however, told reporters that the program would be integrated with state systems as part of the expansion. It will further be amended to permit the filing of a larger number of deductions.

At present, the program can only handle income from a W2 form and a small array of tax credits. Direct File was initially available in 12 states as part of the pilot program. Werfel indicated that the expansion of Direct File to the states "depends on state readiness" and added that "[t]here will be no limit to the number of states that can participate in the coming year."

The program came under scrutiny earlier this year from a group of state financial officers, who had argued that the absence of a state filing mechanism would lead to confusion for taxpayers and lost revenue for states.

"Taxpayers who are unaware that they must separately file state returns will not receive anticipated state refunds this spring. This is significant because many taxpayers who use Direct File are likely to be lower-income and build budgets around anticipated tax refunds," they wrote in March. "States will suffer too. States will lose out on payments from Direct File taxpayers who owe state taxes but incorrectly assume that Direct File covers federal and state filings."

Ben Whedon is an editor and reporter for Just the News. Follow him on X, formerly Twitter.