Color my skeptical. It is nice they are trying it out on Federal employees. I am not elgible so my CPA need not worry.

WASHINGTON—The Internal Revenue Service’s new tax-filing site is far better than wrestling with a paper tax form. And it is free for users. But this first version of the government’s foray into electronic tax preparation isn’t a TurboTax killer yet.

For starters, most people can’t use it this year.

For the tax season that opens Monday and runs through mid-April, the IRS is offering its new Direct File online portal, which walks a taxpayer through the return-filing process and submits the Form 1040 to the government. It is starting with a small group of Americans as a possible first step toward building a government-run alternative to TurboTax and H&R Block. The trial run has been welcomed by Democrats and consumer advocates, though Republicans and private tax-preparation companies question whether it is a good use of government resources because other free filing options exist.

The IRS offered The Wall Street Journal and other news organizations an early look at Direct File.



A look at a test of the IRS Direct File website
ASHLEA EBELING/THE WALL STREET JOURNAL (2); RICHARD RUBIN/THE WALL STREET JOURNAL
The Basics
Direct File does the job for the most basic of basic tax returns and mostly uses plain language, with links to IRS details. It could be useful for a recent graduate working a first job in New York or for Florida retirees living mainly on Social Security benefits. And it has the potential to scale up to include more complex returns if this year’s pilot program goes well.

ELIGIBLE STATES
Arizona
California
Florida
Massachusetts
Nevada
New Hampshire
New York
South Dakota
Tennessee
Texas
Washington
Wyoming
But most taxpayers can’t use Direct File this year. Say you have gig income or take retirement account distributions or live in Illinois or Oregon (or most other states). Say you have even one dollar of dividend or capital gains income, or you obtained health insurance through the Obamacare marketplace. That is all too complicated for tax year 2023 returns.

At the beginning, Direct File is invitation-only, and those invites are going to state and federal workers. By mid-March, the IRS aims to make it available to the subset of the public with simple enough returns to use it, IRS Commissioner Danny Werfel said. Depending on how the rollout goes, IRS officials say hundreds of thousands of taxpayers could file their 2023 tax year returns this way.

Agency officials kept the pilot small on purpose. They want to study how smoothly Direct File users move through the system, how well the customer service works and whether the returns are more likely to contain errors before deciding if they should go bigger.

“We’re really starting small and there’s a lot we want to learn,” Bridget Roberts, who leads the project, said at a recent tax conference.

Biggest Plus
The cost. It is completely free.

Once it is live, a chat function will let users get help from IRS employees. The IRS won’t charge for assistance. Employees won’t try to upsell you. Taxpayers spent an average of $150 to prepare returns last year, according to the Treasury Department.

IRS employees available through live chat are trained on the Direct File tool, so they should be able to guide you through any problems. That said, they aren’t there to give you customized personal financial advice. It may end up feeling more like an interactive IRS publication.

Users will be able to toggle between English and Spanish. Officials say Direct File will work on desktops and smartphones.

Biggest Minus
It can be a winding road through all the questions and screens, partly because the government needs legalese to cover all possible situations, such as whether you have an Adoption Taxpayer Identification Number. It is also cumbersome because of the effort the IRS goes through to keep the pilot limited.

There are seven screens to get through just to see if Direct File appears to be a good fit for you. The pilot is available in 12 states, including eight with no broad state income tax. In Massachusetts, Arizona and New York, Direct File will bring information right into those states’ systems. California residents can use Direct File, but it doesn’t connect with the state’s similar system.

If you don’t qualify, the initial screen prompts won’t let you start entering your personal information, and will instead direct you to other options to file your return.

Other Free Tax Filing Options
IRS Free File Eight commercial tax preparation companies have partnered with the IRS to let users with income up to $79,000 file simple returns for free. Higher income taxpayers can use free fillable online forms.
VITA Households with adjusted gross incomes up to $64,000 can get free basic tax return help through the IRS Volunteer Income Tax Assistance program.
TCE The Tax Counseling for the Elderly program, often run by AARP Tax-Aide volunteers, generally helps older adults with low to moderate incomes with tax preparation and other tax issues
Private Companies Some private companies offer free options to certain taxpayers.
For now, Direct File supports the child tax credit, earned-income tax credit and the credit for other dependents, all common for lower-income and middle-income households. Werfel said the IRS could update the system in less than a day if Congress expands the child credit, as lawmakers are currently discussing.

But Direct File won’t work for you if you paid for child care to work and want to claim the child and dependent care tax credit, or if you want to claim a credit for making energy-efficient home improvements.

Anyone who itemizes deductions or has wage income over $200,000 can’t use Direct File, though it does support special deductions for student loan interest and teachers’ out-of-pocket expenses.

Give It Time
If you get through all those screens, be prepared to spend some time inputting all of your personal information, transcribing the numbers off the boxes on your W-2 wage statement, and answering questions such as: Did you receive any digital assets as a reward, award, or as a payment for property or services?

Notably, you’re the one entering information—Direct File isn’t pulling your W-2 from the IRS database. And in the pilot version you can’t upload your W-2 as a PDF, as you can with some commercial tax-preparation software.

We spotted some quirks: The program prompted us for a correction if we entered a six-digit ZIP Code, but it doesn’t check whether your ZIP Code matches your address.

SHARE YOUR THOUGHTS
Would you consider switching from TurboTax to the IRS’s tax-prep service? Join the conversation below.

Filing this way won’t necessarily speed up your tax refund. And you are still responsible for your own return—you could still get an IRS notice or trigger an audit if you omit income or make a mistake.

At the end, there is a handy summary screen, with a link to download a PDF of your return.

With private software, the size of your refund is often shown in a running tally, and that total is the most important outcome.

The Direct File summary screen is much more IRS,designed to educate rather than reward: It explains exactly how your taxes were calculated.

Your tax dollars at work.

IMO the government should not be competing with the private sector or reinventing the wheel by making a square one. Why not just by a license from Turbo Tax and provide the TT version.

This is akin to the $500 toilet seat. A gov't agency needs software to perform some standard business process, but rather than buying an off-the-shelf product they customize it at huge expense and then are stuck with that vendor for future updates, maintenance, etc.

If we had a Fair Tax or Flat Tax this would be moot. It's crazy that our tax system is so complicated.

Got a link?

Sorry: Keep getting page not found.

Long overdue IMO. If our taxes are too complicated for the average person to calculate using all the various forms, it's time they can be easily done electronically. In this day and age we should be able to do this on our phones!

How could it be easier? The tax form of the future:

                            +--------------+
1) enter how much you made. |              |
                            +--------------+

2) send it in.

quote:

Originally posted by Skull Leader:
If we had a Fair Tax or Flat Tax this would be moot. It's crazy that our tax system is so complicated.

Or no tax, like the founders planned. Things would look very different if we had stuck with the plan.