IRS Expands Direct File Service for 2025 Tax Filing Season

The Internal Revenue Service (IRS) has announced that its Direct File service will significantly expand for the 2025 tax filing season. The service, which allows eligible taxpayers to file federal taxes for free, will now be available in twice as many states as last year’s pilot program and cover a broader range of tax situations, making it accessible to millions more taxpayers.

Expansion of States and Eligibility

In the 2025 tax filing season, taxpayers in 24 states will have access to the Direct File program, up from 12 states during the pilot phase. The states originally participating in the pilot were Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington State, and Wyoming. For the upcoming filing season, 12 new states will join: Alaska, Connecticut, Idaho, Kansas, Maine, Maryland, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania, and Wisconsin.

This expansion means that over 30 million taxpayers will be eligible to use Direct File, with additional states potentially joining in the future. Several states have already expressed interest in participating for the 2026 tax season.

Broader Tax Situation Coverage

Direct File will also support a more comprehensive range of tax scenarios for 2025. Last year’s pilot covered simpler tax situations, including wage income reported on a W-2, Social Security benefits, unemployment compensation, and certain tax credits and deductions. For 2025, the service will expand to include:

• 1099 Interest Income over $1,500
• Retirement Income
• Alaska Permanent Fund Dividend for Alaska residents

The types of credits available for filing are also expanding. While the pilot supported the Earned Income Tax Credit (EITC), Child Tax Credit, and Credit for Other Dependents, the upcoming tax season will also include the Child and Dependent Care Credit, Premium Tax Credit, Credit for the Elderly and Disabled, and Retirement Savings Contribution Credit. Deductions are expanding as well to include Health Savings Accounts (HSAs), in addition to existing coverage for student loan interest and educator expenses.

According to IRS Commissioner Danny Werfel, “Our goal is to improve the experience of tax filing itself and help taxpayers meet their obligations quickly and easily. Direct File will be a critical part of achieving that goal as we expand and improve the service.”

New Features and Improvements for the 2025 Filing Season

Direct File is a web-based tool that works on multiple platforms, including mobile phones, tablets, laptops, and desktop computers. It guides taxpayers step-by-step through their federal tax return. New improvements for the 2025 season include:

• A New Chat Bot to help users through the eligibility process.
• Expanded Live Chat Support in both English and Spanish, along with new options for authentication and verification, which will enable IRS representatives to provide more detailed assistance.

The system will also help users transition from federal to state tax filings by directing them to appropriate state tools. Commissioner Werfel emphasized that maintaining a strong user experience is the foundation of Direct File, focusing on accuracy and comprehensive credit uptake to ensure taxpayers file correctly and receive their full refunds.

Direct File’s Role in the Tax System

Following the successful pilot in 2024, which saw over 140,000 taxpayers in 12 states use Direct File, the IRS conducted an extensive review to assess its impact and role in the broader tax filing ecosystem. The review highlighted the demand for more no-cost electronic filing options.

The IRS has worked with hundreds of organizations, legislators, and taxpayers to understand their needs better. Feedback from those not included in the pilot demonstrated strong interest in expanding Direct File nationwide.

In May 2024, the IRS announced that Direct File would be a permanent option moving forward, offering it alongside existing options like Free File and paid commercial software. The agency remains committed to its partnerships with Free File, Inc., the Volunteer Income Tax Assistance (VITA) program, and the Tax Counseling for the Elderly (TCE) program—all of which saw increased interest and usage in the previous tax season.

The pilot phase of Direct File also drew attention to other free filing methods, with increased uptake of Free File services, reflecting the growing demand for affordable and accessible tax filing tools.

A Step Towards a Stronger Tax System

As the IRS works to expand Direct File, it aims to strengthen other free filing programs, ensuring a comprehensive tax system that meets the needs of all taxpayers. Commissioner Werfel stated, “Direct File is an important component of a stronger, more comprehensive tax system that gives taxpayers electronic filing options that best suit their needs.”

For the 2025 tax season, Direct File will begin accepting returns as soon as the filing period opens. Taxpayers eligible for Direct File are encouraged to take advantage of this user-friendly service for a quicker, easier tax filing experience.

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