In 2024, the IRS launched a new tax prep pilot called IRS Direct File for taxpayers in 12 states. Direct File is expanding in 2025 to 12 more states. I’ve had a number of readers ask for my opinion on IRS Direct File, with some wondering whether it would be worth their time and effort. So, I did some research and wanted to share an IRS Direct File review with everyone on what I found and cover pilot eligibility, launch date, how to participate in the pilot, state participation, income/credit/deduction limitations, pros, cons, and tax prep alternatives.
What is IRS Direct File?
IRS Direct file is a limited-eligibility IRS tax prep pilot that launched in 2024 and is being expanded and made permanent for subsequent years. At its core, IRS Direct File has the goal of voluntarily allowing taxpayers to file their taxes online, for free, directly with the IRS. Direct File is built in-house at the IRS by a team of tax experts, product managers, software engineers, designers, and data scientists and is part of a broader IRS initiative to become better at servicing taxpayers.
When did IRS Direct File Launch?
The IRS Direct File pilot launched in March of 2024.
Where Can I Sign Up for the IRS Direct File Pilot?
The IRS Direct File site and/or the IRS account sign-in page.
What States Can Use IRS Direct File?
Taxpayers that are residents of these 24 states are able to participate in the IRS Direct File pilot in 2025:
- Alaska
- Arizona
- California
- Connecticut
- Florida
- Idaho
- Kansas
- Maine
- Maryland
- Massachusetts
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- Oregon
- Pennsylvania
- South Dakota
- Tennessee
- Texas
- Washington state
- Wisconsin
- Wyoming
If you are not a resident of one of these 24 states, IRS Direct File is not an option for you in the pilot stage.
Can you File State Tax Returns with IRS Direct File?
With a few exceptions (AZ, CA, MA, NY, and WA), it’s important to note that at this time, those who participate in IRS Direct File cannot use the program to prepare and file state tax returns. This means that any participants who use IRS Direct File to prepare a federal tax return will also need to separately use another tax prep program to file their state return(s).
7 states do not have a state income tax: AK, FL, NV, SD, TN, TX, and WY. Tax filers from these states may find IRS Direct File to be a good fit, assuming other limitations are met.
IRS Direct File Income, Credits, & Deductions Limitations
In the pilot stage, IRS Direct File is limited in what it covers from an income, credits, and deductions standpoint. According to IRS Direct File, here is what it does and does not cover:
Income Covered:
- W-2 wage income
- SSA-1099 Social Security
- 1099-G unemployment compensation
- 1099-INT interest income
- 1099-R retirement income
- 1099-MISC for Alaska residents reporting the Alaska Permanent Fund Dividend
Credits Covered:
- Earned Income Tax Credit
- Child Tax Credit
- Credit for Other Dependents
- Child and Dependent Care Credit
- Premium Tax Credit
- Credit for the Elderly or Disabled
- Saver’s Credit (aka the Retirement Savings Contribution Credit)
Deductions Covered:
- Standard deduction
- Student loan interest
- Educator expenses
- Health Savings Account
The pilot is not an option for taxpayers that:
- Have other types of income, such as gig economy, rental, or business income
- Itemize deductions
Since it is not explicitly stated, I would also not expect IRS Direct File to cover the Clean Vehicle Tax Credit or the new home energy tax credits and rebates.
IRS Direct File Pros
The IRS Direct File pros are:
- Free E-File (if eligible): if you meet the eligibility requirements are within the limitations, using IRS Direct File could result in a free federal e-file.
- Altruism: participating in the program can help with a broader rollout to other taxpayers.
- You will be cool: hey – what’s cooler than being part of an IRS pilot, am I right?
IRS Direct File Cons
The IRS Direct File cons are:
- Limited state eligibility: taxpayers from only 24 states are allowed to participate at the moment.
- Limited income, credits, form coverage: the pilot is limited to very basic returns only at this point.
- Need to file twice: without the ability to simultaneously prepare state returns with IRS Direct File in most states, most participants would need to file a state return through a different tax prep alternative – which means you’ll have to prepare everything twice.
- ID.me requirement: participants need to verify their identity with ID.me.
- It’s a pilot: pilot could equal bugs/limitations.
IRS Direct File Alternatives
With the limitations noted above, if you are looking for alternatives to IRS Direct File, check out my best tax prep programs review and cheapest ways to e-file articles for a full breakdown. In them, you’ll find a number of ways to file your taxes for free and discounts for paid premium versions of all of the top tax prep programs. The alternatives are:
- 3rd Party Tax Prep Software: free or premium paid versions of H&R Block, TurboTax, TaxSlayer, TaxAct, Cash App Taxes, FreeTaxUSA, etc.
- FreeFile/FreeFillableForms: free tax prep options for those with basic returns, in certain states, with low income levels.
- MilTax: free tax prep software for active military and veterans.
Also, check out my DIY tax filing guide for some basics on how to do your own taxes.
IRS Direct File Review: Bottom Line
I think that IRS Direct File has a lot of promise and I’m hoping that the proper resources are put into it to make it a legit tax prep option for everyone nationwide. For 2025, at least, IRS Direct File is not an option as a replacement for other tax prep services, with all of the state, income, complexity eligibility requirements, as well as the fact that you cannot prepare state returns with it (and would need to re-file elsewhere all over again as a result). In this pilot stage it may be a fun thing to participate in for individuals who are fairly savvy with tax filing and would like to see an established IRS tax prep alternative in the future.