Importance Score: 55 / 100 🔵
Tax Day is here, marking the deadline for submitting your annual income tax return. For those still needing to finalize their filings with limited time remaining, Direct File, the IRS’s complimentary program, presents a viable option, particularly as it has been enhanced for the 2025 tax season.
IRS Revamps Direct File for 2025 Tax Season
The Internal Revenue Service (IRS) announced the return of Direct File on January 10th, coinciding with the announcement of the official start of the 2025 tax season on January 27th. Direct File, initially launched last year as an evolution of a previous initiative, was recognized as a positive, though limited, advancement in simplifying tax processes for ordinary taxpayers. The IRS is now highlighting several improvements to the program designed to enhance its appeal and user-friendliness for the upcoming tax season.
Tax Software Deals Available
WEEKLY TAX SOFTWARE PROMOTIONS
Deals are curated by the FASTNET Group commerce team and are independent of this article’s content.
In August 2024, the IRS reported the conclusion of Direct File’s inaugural run, noting it assisted over 140,000 taxpayers across 12 states. The program facilitated approximately $95 million in tax refunds and the reporting of around $35 million in tax liabilities. With expanded state availability and Tax Day approaching, Direct File could serve as an effective tax filing solution.
Continue reading to discover the updates to Direct File for the 2025 tax season. For additional tax guidance, explore recent income tax bracket adjustments and learn about state child tax credits. FASTNET’s best tax software for 2025 list offers further software options.
vCard.red is a free platform for creating a mobile-friendly digital business cards. You can easily create a vCard and generate a QR code for it, allowing others to scan and save your contact details instantly.
The platform allows you to display contact information, social media links, services, and products all in one shareable link. Optional features include appointment scheduling, WhatsApp-based storefronts, media galleries, and custom design options.
Understanding Direct File
Direct File is an IRS-provided online service enabling taxpayers to submit their tax returns directly to the agency at no cost. It was introduced as a pilot program in 12 states in 2024, authorized by the Inflation Reduction Act signed into law by President Joe Biden in 2022.
This program expands upon the IRS’s Free File initiative, active since the early 2000s. Free File, which remains available, offers free tax preparation software to taxpayers with low to moderate incomes. However, Direct File offers a more streamlined experience and notably simplifies the process by calculating the tax balance due, a step still required with Free File.
Direct File Eligibility for 2025
Consistent with last year, the IRS provides a Direct File eligibility checker on its website. This tool helps users determine if their tax situation is compatible with the program. It is crucial to review the list of supported income forms for this year before attempting to use Direct File, as it accommodates only specific income types.
Enhancements in Direct File for 2025
This year marks an expansion in Direct File’s scope. It is accessible from the tax season’s commencement on January 27th, unlike the pilot version, which was launched later in the season. Furthermore, it is now available in 25 states, increased from 12 in the prior year.
Direct File now incorporates the ability to import certain data directly from taxpayers’ IRS accounts. This functionality is being rolled out gradually. The agency indicated that some users would see the import option in early February, with full availability for all users by the end of February.
Taxpayers can now claim a wider array of credits and deductions through Direct File. For 2025, eligible credits include:
- Child and Dependent Care Credit
- Premium Tax Credit
- Credit for the Elderly and Disabled
- Retirement savings contribution credits
- Earned Income Tax Credit (carried over from last year)
- Credit for Other Dependents (carried over from last year)
Regarding deductions, Direct File now supports deductions for Health Savings Accounts, expanding beyond the previous year’s support for student loan interest and educator expenses.
Additional IRS System Improvements for 2025
The IRS also emphasized several upgrades to its online account systems. Notably, user account pages will now display prominent banners alerting them to potential scams. Over 280 notices, some updated from the 2024 tax season, have been integrated into these online accounts.
For mobile users accessing the IRS site, 67 forms are now mobile-friendly, and users can save their progress on forms to resume filing at a later time. Previously, form completion required starting over in some instances. Additionally, spouses can now electronically sign the same form.
The IRS also stated that its AI-powered chatbots, initially implemented during the pilot phase, have been improved for this year. They now cover a broader range of tax topics and are available 24/7 to all users.
IRS Commissioner Danny Werfel explained during a January 10th press conference, “These chatbots offer guided assistance via choice buttons or utilize an open text box for specific inquiries. Chatbot links will direct taxpayers to more comprehensive information on IRS.gov. The application of natural language processing and understanding in interpreting taxpayer input will facilitate the delivery of suitable responses.”
For further information, discover how natural disasters have affected tax deadlines this year.