IRS free tax filing program launches in 12 pilot states. Here’s what to know

After weeks of testing with roughly 1,500 returns, Direct File, a free tax filing program from the IRS, is now fully open in 12 pilot states, according to the U.S. Department of the Treasury.

While the pilot focuses on “simple tax situations,” the Treasury estimates the pilot could cover about one-third of tax situations for 19 million taxpayers. The Spanish language version opens later on Tuesday at 1 p.m. ET. 

“Dozens of countries have provided free tax options to their citizens for years,” Deputy Secretary of the Treasury Wally Adeyemo said during a press call on Monday. “American taxpayers who want to file their taxes for free directly with the IRS should have that option.”

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Treasury officials hope at least 100,000 taxpayers will participate in the Direct File pilot for 2023 filings as the agency makes future decisions about the program, Adeyemo said.

Within five years, the program could save the average filer $160 per year, or a collective $11 billion annually including tax prep fees and time, according to a report from the Economic Security Project released Monday.

The IRS Direct File pilot states include Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming. Alaska was originally included but is no longer part of the pilot.

The soft launch and limited rollout were intentionally designed to capture data to make improvements and decisions for the future, a senior administrative official said.

Direct File pilot doesn’t support state returns, but the software will guide users from Arizona, California, Massachusetts and New York to a state-supported tax-prep tool.