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Can you feel that energy in the air, the crackle of excitement among America’s accountants? Yes, today marks the official kickoff of tax season. And while the IRS code hasn’t undergone any huge changes that are likely to impact your return year, there are at least a couple of developments worth a heads-up.
Depending on what state you reside in, you could be newly eligible to use the IRS’s Direct File program, which allows you to submit a return straight to Uncle Sam for free, and has some nice upgrades this year that should make it useful to a greater number of filers. If you’re a gig worker or small business owner who gets paid via apps like PayPal or Venmo, meanwhile, you’re likely covered by some new reporting rules meant to stamp out low-level tax fraud.
Read on for more details.
Read more: How to file your 2024 tax return for free
Direct File is expanded
After last year’s well-reviewed pilot effort, the IRS is expanding its Direct File program to 13 new states, bringing the grand total to 25. The portal is still designed for relatively simple returns but now comes with some new functions that you typically find in private tax prep software, like the ability to automatically import your W-2 information straight from the IRS. It can now also handle a larger variety of tax circumstances, including returns that claim the following credits:
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The Earned Income Tax Credit
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Child Tax Credit, Child and Dependent Care Credit
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The Affordable Care Act’s Premium Tax Credit
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The Credit for the Elderly and Disabled
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Retirement savings contribution credits
The IRS believes those additions should make 30.3 million Americans eligible to use Direct File this go-round. Bear in mind, though, the program still has strict income limits:
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Individual filers are only eligible if they make less than $200,000 in wages a year, or $168,000 if they have more than one job.
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Couples filing jointly must earn wages of $250,000 or less.
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Couples filing separately must each have wages under $125,000.
Taxpayers also can’t use Direct File if they have certain kinds of income, like capital gains or rental earnings. So, if you’re a landlord or day trader, move along.
Direct File earned solid reviews last year, as Americans used it to submit just over 140,000 returns. In a 15,000-person customer service survey, about 90% of users rated their experience as “excellent” or “above average” and more than three-quarters said the program was easy to use compared to the method they’d relied on to file taxes the year before. The Government Accountability Office also deemed the pilot a success. However, it’s possible customer service could take a hit this year thanks to the Trump administration’s federal hiring freeze, which may hurt the IRS’s ability to properly staff up.