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How to Get Access to the IRS’s New Free Tax Software
By Adam Hardy MONEY RESEARCH COLLECTIVE
The IRS is letting people use its new free Direct File service to file their 2023 taxes for free. But snagging a seat can be tricky.
This tax season, the IRS is testing a new way for taxpayers to file for free — if they can get access, that is.
As of Monday, the agency’s free guided tax-filing software, called Direct File, is accepting new participants from a dozen states as part of a pilot test. But snagging a seat can be tricky.
Although the Direct File website now allows new users to start filing their returns 24/7, it may close to new taxpayers if too many people try to access it.
The IRS did not specify how many new users it would allow in daily, but this is a step up from last week, when it said Direct File was open only “for short, unannounced windows of time.” And starting March 12, the IRS says Direct File should be open to all qualifying taxpayers in the states participating in the pilot test.
Here’s what you should know if you want to file your 2023 taxes for free using the IRS’s new software. (Note: This tool is different from IRS Free File, which is available to anyone who made under $79,000 last year and opened in January.)
Check your eligibility
The biggest factor in determining your eligibility to join the IRS Direct File pilot test is location. During this phase, the IRS is only allowing taxpayers in the following 12 states to join:
- Arizona
- California
- Florida
- Massachusetts
- Nevada
- New Hampshire
- New York
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
You should have lived and earned all of your 2023 income in your state to qualify. Of those 12 states, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming do not have state income tax. For the remaining states, Direct File may prompt you to complete your state income taxes once you’re finished with your federal return.
Other key criteria include that your 2023 income must have come from the following sources:
- W-2 earnings from an employer
- 1099-G (unemployment benefits)
- SSA-1099 (Social Security benefits)
- and/or 1099-INT (interest of up to $1,500)
The IRS is imposing income restrictions for Direct File, as well. You won’t be able to use Direct File if your wages exceed $200,000 (or $160,200 if you had more than one employer). For married taxpayers filing separately, your wages can’t exceed $125,000, and total wages for joint filers can’t exceed $250,000.
Freelancers or gig workers earning income from independent contractor work won’t be able to use the tool during the pilot phase, either.
The Direct File tool also does not currently accept itemized deductions — only the standard deduction, which is $13,850 for tax year 2023. Similarly, the tool only allows you to claim the child tax credit, the earned income tax credit and the tax credit for other dependents. People with more complex tax returns will have to find another way to file their tax returns, like through the IRS Free File program or a third-party tax prep software.
Prepare ahead of time
Given the limited nature of the pilot test, it helps to prepare as much as you can before you plan to use Direct File, so the window doesn’t close before you’ve had a chance to file.
One way to set yourself up for success is to sign up for email alerts from the IRS. If you opt in for Direct File pilot news, the IRS will send you email updates about the pilot test.
Another key step you should take in advance is signing up for an ID.me account. ID.me is an identity verification service that you will be required to use to sign into the IRS Direct File pilot test.
Signing up for ID.me requires your name, email, Social Security number, government-issued ID as well as a smartphone with a camera or a computer with a webcam. ID.me will need to verify that your face matches your ID. You can choose to do this via facial recognition software or video chat with a representative. Once your ID.me account is ready to go, you must go back to the IRS Direct File site and log on through ID.me.
If you are able to log in, you should start your federal tax return as soon as possible. Once you start filing, your seat is reserved, and you can come back to finish later (regardless of whether the window is technically open or closed). Even if you’re able to log into Direct File during the pilot test, if you haven’t started your federal return, you might get kicked out.
Monitor the IRS website
Aside from signing up for email alerts, the best way to know when Direct File is accepting new people into the pilot test is by checking the Direct File website.
At the top of the homepage, a banner will display “the Direct File pilot is currently open to new participants” if it is indeed open.
The site will not tell you how how many seats are left for the day, so that message should be your green light to start filing ASAP.
The site is also not very clear on how to begin filing your taxes while the pilot test is open. To do so, select the “check my eligibility” button (even if you’ve already verified that you’re eligible) and click through all the criteria. At the end, the site will direct you to sign in using your ID.me account, which — if you’ve set it up ahead of time — should be as simple as clicking a green sign-in button.
Once you’re officially in the pilot test, follow the guided prompts to file your federal tax return while referencing your W-2 and 1099s, if any. If you’ve ever filed using other guided tax prep software like TurboTax or H&R Block, then Direct File should feel intuitive, as the IRS’s software also asks simple step-by-step questions and gives you references to where you can find various data points on your documents.
At the end, the IRS will estimate the amount of your tax refund — or how much you owe — and give you a chance to review your information before submitting. If you’re receiving a refund, you can select whether you want it direct deposited or sent by check through the mail.
This year, the IRS also updated its “Where’s My Refund?” tool to make tracking your tax refund easier. If you chose direct deposit, your refund should hit your bank account within about three weeks.
More from Money:
Tax Changes 2024: What’s New for Filing Taxes With the IRS This Year?
How to File Your Taxes for Free With TurboTax This Year
How to Get Free Tax Help From the IRS and Others
Adam Hardy is Money's lead data journalist. He writes news and feature stories aimed at helping everyday people manage their finances. He joined Money full-time in 2021 but has covered personal finance and economic topics since 2018. Previously, he worked for Forbes Advisor, The Penny Hoarder and Creative Loafing. In addition to those outlets, Adam’s work has been featured in a variety of local, national and international publications, including the Asia Times, Business Insider, Las Vegas Review-Journal, Yahoo! Finance, Nasdaq and several others. Adam graduated with a bachelor’s degree from the University of South Florida, where he studied magazine journalism and sociology. As a first-generation college graduate from a low-income, single-parent household, Adam understands firsthand the financial barriers that plague low-income Americans. His reporting aims to illuminate these issues. Since joining Money, Adam has already written over 300 articles, including a cover story on financial surveillance, a profile of Director Rohit Chopra of the Consumer Financial Protection Bureau and an investigation into flexible spending accounts, which found that workers forfeit billions of dollars annually through the workplace plans. He has also led data analysis on some of Money’s marquee rankings, including Best Places to Live, Best Places to Travel and Best Hospitals. He regularly contributes data reporting for Best Colleges, Best Banks and other lists as well. Adam also holds a multimedia storytelling certificate from Poynter’s News University and a data journalism certificate from the Investigative Reporters and Editors (IRE) at the University of Missouri. In 2017, he received an English teaching certification from the University of Cambridge, which he utilized during his time in Seoul, South Korea. There, he taught students of all ages, from 5 to 65, and worked with North Korean refugees who were resettling in the area. Now, Adam lives in Saint Petersburg, Florida, with his pup Bambi. He is a card-carrying shuffleboard club member.