The Internal Revenue Service (IRS) will begin a pilot program for its electronic free file tax return system in January. This experimental phase, set for the 2024 filing season, is expected to involve hundreds of thousands of taxpayers from 13 states.
Private tax preparation firms, who profit considerably from their software services, have strongly objected to the government-run initiative. However, the IRS is determined to avoid the pitfalls encountered during the healthcare.gov website launch a decade ago. IRS Commissioner Daniel Werfel emphasized a phased introduction, similar to private sector practices, with the aim to refine the system based on the pilot’s findings.
Taxpayers eligible for the pilot will be identified through collaboration with nonprofits, congressional offices, and states, based on specific income types and claimed tax credits. Although primarily offering an alternative tax filing method, Werfel also views this pilot as a transformative step for the IRS.
The initiative has garnered criticism for solely addressing federal tax returns and omitting state returns. To counter this, the IRS is liaising with four states – Arizona, California, Massachusetts, and New York – to incorporate state taxes in the pilot. Additionally, Code for America is partnering with state authorities to create complementary state filing tools.
Robert Weissman, president of Public Citizen, commended the IRS’s progressive approach for the 2024 pilot. Residents from nine states without an income tax might also qualify for this pilot. Werfel will disclose more details, including the selection criteria, in January.