Don't Mess With Taxes

UPDATE, Sept. 5, 2025: Has your state joined Direct File? Check out this special Direct File 2025 Participating States page.

Two more states, New Mexico and Pennsylvania, joined Direct File last week.

Direct File is the Internal Revenue Service created no-cost online tax preparation program. Eligible taxpayers can use it prepare and then e-file their annual tax returns for free. It is similar to Free File, the IRS partnership with some in the tax software industry, but Direct File cuts out the private sector and allows taxpayers to take care of filing directly with Uncle Sam.

When Direct File launched earlier this year, the pilot was limited to certain taxpayers in 12 states through Tax Day. By that April 15 cutoff day, 140,000 taxpayers in the participating dozen 12 states had used Direct File, claiming more than $90 million in refunds.

The Treasury Department and IRS said that by sidestepping private tax software middlemen, Direct File taxpayers saved an estimated $5.6 million in filing fees.

In May, Treasury and IRS deemed the 2024 filing season pilot a success and announced Direct File would be made permanent, and invited all states to be a part of the program during the coming 2025 filing season.

Earlier this year, New Jersey and Oregon decided to participate. The addition this week of New Mexico and Pennsylvania brings Direct File membership next year to 16.

So, 16 is this weekend’s By the Numbers figure.

Keystone State entry into Direct File: Treasury Secretary Janet Yellen traveled to Philadelphia July 30 to announce Pennsylvania’s decision to join Direct File. She was joined by Gov. Josh Shapiro and several Democratic members of the state’s Congressional delegation.

Yellen noted that this year’s Direct File pilot was an intentional soft launch.

“To make sure the pilot went smoothly, we focused on taxpayers in 12 states and with simple returns. Over just five weeks, interest grew as we got the word out and taxpayers started using the product,” Yellen said.

“By the final week, Direct File was processing more than 5,000 accepted returns each day. By the end of filing season, more than 140,000 taxpayers across all 12 of the pilot states filed through Direct File, far exceeding the 100,000 goal we had set,” she added.

Starting in January 2025, more that 1.5 million Pennsylvania taxpayers will be eligible to join other Direct File users.

“Filing your taxes should be free and easy. That’s why we’re improving our digital services and adopting IRS Direct File here in Pennsylvania,” said Shapiro. “Pennsylvanians will be able to save money by filing both their state and federal taxes at no cost on an easy-to-use platform.”

Sen. Bob Casey called Direct File is “a game-changing, commonsense” tax filing program. Reps. Brendan Boyle and Mary Gay Scanlon also lauded the program for saving taxpayers the cost of commercial tax filing programs.

Land of Enchantment’s Direct File participation: Two days later, Treasury announced that New Mexico will be the fourth new state to join IRS Direct File for the 2025 tax filing season.

More than 200,000 New Mexicans will be eligible to use the free online filing tool next year.

“This collaboration with the IRS will simplify the tax filing process for New Mexicans,” said Democratic Gov. Michelle Lujan Grisham.

New Mexico has an individual state income tax, and Grisham added Direct File will give her state’s taxpayers a “free, reliable, and efficient way to manage their federal and state tax filings.”

U.S. Sen. Martin Heinrich and Rep. Melanie Stansbury, both Democrats, also expressed their support for New Mexico joining Direct File.

Potential political roadblocks: The latest states to join Direct File next year all have Democratic governors. State and federal legislators in New Jersey, New Mexico, and Oregon tend to lean that direction, too. Pennsylvania has a more divided legislative representation.

So, it is no surprise that officials in this latest group are happy to be a part of Direct File, which was created using funds in the Biden Administration’s Inflation Reduction Act.

It could be more difficult to convince solidly red states to participate.

However, there are some decidedly red states, notably Florida and Texas, among the pilot’s original 12 participants. The first dozen states to join Direct File were Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Most Republicans on Capitol Hill are opposed to Direct File. Some have introduced legislation to kill the free filing program.

But if enough voters taxpayers let their lawmakers know they want to give Direct File a try, state officials just might consider joining Direct File.

You also might find these items of interest:

• IRS' free Direct File officially opens to all eligible taxpayers
• FFTC takes actions against Intuit/TurboTax & H&R Block tax software programs
• Free File’s 8 software companies are available for 2024 filings through the Oct. 15 extension deadline

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