24 States Will Adopt the IRS’s Free Filing Program for the 2025 Tax Season

Federal tax forms at the IRS in Chicago on Nov. 1, 2005. Scott Olson/Getty Images

More than 30 million Americans across 24 states will be eligible for Direct File in filing season 2025, according to a joint statement from the U.S. Department of the Treasury and the Internal Revenue Service (IRS).

Tax-paying citizens were able to use Direct File, the free e-filing service, in the states of Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington State, and Wyoming during the pilot launch last year. For 2025, this has expanded to Alaska, Connecticut, Idaho, Kansas, Maine, Maryland, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania, and Wisconsin, the IRS said in an Oct. 3 statement.

In the pilot phase, more than 140,000 taxpayers across 12 states used the program. The reviews were reportedly “overwhelmingly positive.” More states could join in 2025, as several states have expressed interest for 2026, the tax agency said.

“By doubling the number of participating states and expanding eligibility, Direct File has the potential to save Americans tens of millions of dollars in filing fees in the upcoming filing season, advancing the Biden–Harris administration’s goal of reducing costs for American families,” Secretary of the Treasury Janet L. Yellen said in the Treasury release.

According to the Treasury, the program offers a “free, easy, and secure option” for filing taxes with no hidden fees, while being accessible on a smartphone and computer. It “shows taxpayers the math” for assisting their return calculations, and to make sure “they are getting their maximum refund.” There also is a live chat feature in English and Spanish.

After the federal tax return is completed, the program guides users to state tools to complete their state tax filings.

However, not all taxpayers are eligible for Direct File, and all tax situations are not covered under the program. An estimate of the people expected to be eligible for the program in each state is given on the Treasury website.

“During the pilot last year, Direct File covered limited tax situations, including wage income reported on a W-2 form, Social Security income, unemployment compensation, and certain credits and deductions,” the IRS said. “For the 2025 filing season, Direct File will support 1099s for interest income greater than $1,500, retirement income, and the 1099 for Alaska residents reporting the Alaska Permanent Fund dividend.”

In 2024, the program assisted taxpayers to claim the Earned Income Tax Credit, Child Tax Credit, and Credit for Other Dependents, and for 2025, it will cover the Child and Dependent Care Credit, Premium Tax Credit, Credit for the Elderly and Disabled, and Retirement Savings Contribution Credits, besides claiming deductions for health savings accounts.

“User experience, both within the Direct File tool and the integration with state tax systems, will continue to be the foundation for Direct File moving forward,” said IRS Commissioner Danny Werfel. “We will focus—first and foremost—on continuing to get it right. Accuracy and comprehensive tax credit uptake will be paramount concerns to ensure taxpayers file a correct return and get the refund to which they’re entitled.”

Conveniences and Consequences

Earlier this year, a group of 13 Republican attorneys general criticized Direct File, saying that it would harm low-income Americans.

“We write to you in opposition to the unnecessary and unconstitutional efforts to empower the Internal Revenue Service (IRS) with the expansive authority to prepare and file tax returns for all taxpayers,” said a Jan. 30 letter from the attorneys general to the Treasury secretary. “Congress has never granted the Department of the Treasury authority to create a Direct File program. And for good reason: the American taxpayers do not want to invite the proverbial fox into the hen house. A Direct File program will also have negative consequences for low-income filers and devastate small businesses.”

Moreover, there are uncertainties surrounding its funding.

The IRS cost estimates for Direct File are not backed by any documentation, with the agency failing to include several key costs in its estimate, according to a report by the Government Accountability Office (GAO).

The IRS had estimated that Direct File could cost between $64 million and $249 million annually. However, the GAO, along with the IRS watchdog Treasury Inspector General for Tax Administration, found that the tax agency “had no documentation to support the underlying data, analysis, or assumptions used for Direct File cost estimates.”

The Economic Security Project, a nonprofit, estimates the program to be financially viable for U.S. taxpayers.

“At maturity in five years, Direct File would save the average user $160 in filing fees and hours of their time each year, which saves Americans a total of $11 billion annually between filing fees and time costs,” the March report said. “By breaking down barriers to filing, Direct File would also deliver up to $12 billion each year in additional tax credits to low-income families currently missing out.”

House Republicans introduced legislation, the “IRS Overreach Prevention Act,” to halt the IRS free electronic-filing program in July.

“The Secretary of the Treasury may not continue the Direct File program of the Internal Revenue Service, and may not develop or provide to taxpayers any successor program which provides a free, public electronic return-filing service option,” said the proposal, sponsored by Rep. Adrian Smith (R-Neb.) along with other GOP members.

The proposal could gain steam if the GOP secures presidential victory in the upcoming elections.