States Take Up IRS’s Direct File, Opening Tool to 30 Million

More than 30 million taxpayers will be eligible to file their federal returns for free directly with the IRS in 2025.

Taxpayers with low to moderate incomes in 24 states will have the option to use the Direct File tool starting the first day of filing season, the IRS and Treasury Department announced Thursday.

“We will focus first and foremost on continuing to get it right,” IRS Commissioner Danny Werfel said in a press call. “Accuracy and comprehensive tax credit updates will be paramount concerns to ensure taxpayers file a correct return and get the refund they are entitled to.”

Direct File in 2025 is an expanded version of the pilot that launched in 2024 in 12 states, allowing for taxpayers in more states and with additional types of income, credits, and deductions to be eligible.

Direct File will be available in Alaska, Arizona, California, Connecticut, Florida, Idaho, Kansas, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin, and Wyoming.

The IRS gave all states the option to join for the upcoming filing season. Additional states have also expressed interest in participating in Direct File in 2026, Werfel said.

More Tax Situations

Direct File, which was made permanent in May, faces objections from Republicans in Congress and tax preparation software companies that say it’s unnecessary, while Democrat lawmakers and progressives celebrate the free tool for taxpayers. As the tool expands, it could pose a threat to the tax-prep software industry.

The IRS launched Direct File this year after the Democrats’ 2022 tax-and-climate law, also known as the Inflation Reduction Act, gave the agency $15 million to study the feasibility of creating an e-filing return system. Treasury leadership then directed the IRS to create a pilot.

In its pilot season, 140,803 taxpayers filed using Direct File, a fragment of the 19 million eligible taxpayers. The IRS said it intentionally limited the pilot’s size and scope to follow best practices for new technology. It minimized the states and tax situations, and delayed the launching of the tool to mid-filing season.

For the 2025 tax year, Direct File also will support individuals who qualify for the credit for other dependents, child and dependent care credit, premium tax credit, retirement savings contributions credit, and the deduction for health savings accounts. This is in addition to tax situations from its pilot season.

After taxpayers complete their federal tax returns, and they live in a state with a state income tax, they will be prompted to file their state returns on another platform.

Still, cost and how the IRS plans to pay for the upkeep and advancement of the tool remain a concern for agency watchdogs and Direct File critics.

An agency watchdog found that the IRS failed to follow best practices in its cost estimates for the program. The agency estimated the pilot cost was $31.8 million—a combination of costs for the IRS and its US Digital Service partner.