IRS announces major changes by 2025 that will affect millions of Americans

The IRS recently announced an exciting update for the 2025 tax season, and this change could impact millions of Americans. The Internal Revenue Service (IRS) is expanding Direct filethereby making it accessible to a much larger group of taxpayers. For many, this will mean a big change in the way they file their taxes, potentially saving both time and money.

What is Direct File?

Direct File is a free, web-based tool from the IRS that allows taxpayers to file their federal taxes directly without having to use third-party software or pay for professional tax services. Started as Pilot program In 2023, it was initially available to a limited number of taxpayers. However, based on positive feedback and successful use during the pilot, the IRS is expanding this tool for the 2025 tax season.

Unlike traditional tax software, Direct File walks users step-by-step through their federal tax return, asking simple questions to gather the necessary information. Once the federal return is complete, users may also be directed to state tax filing tools. This feature is particularly useful for those filing in states with Income tax requirements.

For decades, many Americans have relied on paid tax software like TurboTax or H&R Block to complete your returns. Others have turned to professional tax preparers, often spending hundreds of dollars on a relatively straightforward process. Direct File changes all that by providing a free and easy-to-use platform that everyone can access.

Danny Werfelthe IRS commissioner, emphasized that this expansion is about making tax filing easier and more accessible for millions of Americans. “Our goal is to make the tax filing process easier and more efficient for everyone,” he said. Expanding Direct File in 2025 means more people will qualify and more states will be included in the program.

Who can use Direct File in 2025?

For the 2025 tax season, 24 states will have access to the IRS's Direct File tool. These states include:

• new York
• New Jersey
• Connecticut
• Arizona
• California
• Florida
• Massachusetts
• Nevada
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming
• Alaska
• Idaho
• Kansas
• Maine
• Maryland
• New Mexico
• North Carolina
• Oregon
• Pennsylvania
• Wisconsin

This brings the total number of eligible taxpayers to over 30 million people. And that number could rise even further as more states are expected to join the program in the following years. But it doesn't just depend on where you live. The IRS has also expanded the scope who is qualified for Direct File. In 2025, the tool will cover a much wider range of tax situations and allow more people to use it. This includes:

• Income reported via W-2 forms
• Social Security Income
• Unemployment benefits
• Interest income over $1,500 (reported on 1099 forms)
• Retirement income
• Eligibility for popular tax credits like the Earned Income Tax Credit (EITC), the Child Tax Credit, and more.

In short, if your tax situation is not this overly complicatedThere's a good chance you can submit the file for free through Direct File.

The IRS is rolling out the tool gradually to ensure it works smoothly and efficiently before expanding it further. Each state has its own tax regulations, which makes the process of creating a unified system more complex. By starting with a select number of states and tax situations, the IRS can effectively manage the rollout and ensure that any technical issues are resolved before expanding the service nationwide.

What's next?

The IRS is constantly working to improve Direct File and the 2025 tax season will include some exciting new features. For example, a new chatbot will be available to help taxpayers verify their eligibility and guide them through the filing process. The IRS also plans to improve the live chat feature to provide more personalized support to users who need it.

For millions of Americans, Direct File represents a major change in the way they approach tax season. No more expensive software, no more fees – just a simple, free and easy-to-use tool that makes tax returns less of a hassle. As tax season approaches, keep an eye out for further updates from the IRS. And if you qualify for Direct File, you could potentially save time, money and stress in 2025.