The New Direct File System for Taxpayers

By Charles Healy

Every year, taxpayers work to have their taxes filed with the IRS and New York State Department of Taxation and Finance by the standard filing deadline (or by the extended deadline if they’ve filed for an extension). For this filing season, the standard filing deadline is April 15, 2024. Instead of completing and submitting paper forms, many taxpayers self-prepare their taxes using online tax preparation services, authorized by the IRS. This year, while they can still do that, eligible taxpayers will also have an additional electronic filing option to choose from, enabling them to file their tax returns using a tax preparation system developed and maintained by the IRS. The system is called Direct File.

The IRS Direct File system, which is in its pilot year this year, is available to taxpayers who meet certain criteria. First the program is only available to taxpayers in certain states, with New York being one of those. Second, the system allows for only certain types of income. These are employment income where the employer has issued a W-2; unemployment income with a corresponding 1099-G; Social Security income with an SSA-1099; and interest income of less than $1,500 from U.S. Savings Bonds or Treasuries. Taxpayers who had income from other sources, such as from gig work or through payment applications, will not be able to file using Direct File. Additionally, taxpayers can use Direct File to claim the federal Child Tax Credit, Earned Income Credit, and the Credit for Other Dependents. However, taxpayers seeking to claim any other credits will need to use a different system this year.

There are other restrictions, and the IRS has produced an online tool for taxpayers to check their eligibility, which can be accessed here. Also, in order to use Direct File, taxpayers will need to create an IRS online account and go through the verification process administered by ID.me. You can follow this link for a brief video about the new Direct File system. Finally, Direct File will not generate a state return, but for taxpayers living in Arizona, California, Massachusetts or New York, the system points users to a tool supported by their state to prepare the state return.

Taxpayers with questions about their tax returns can contact BKA for a consultation. Please call us at (718) 487-2300 or write to us at [email protected] to set up an appointment.