The IRS’s New Tax Tool Is Out. Here’s How It Works.
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Here's your money briefing for Tuesday, January 30th. I'm Arianna Espudu for The Wall Street Journal, filling in for J.R. Whelan. There's something a little different in the air this week. Nope, it's not a warm spring breeze just yet. It's actually a different season. Monday, January 29th marks the official start of tax season, when individuals can start filing their tax returns, which are due on April 15th. This year, some filers will have access to a new tool to help them submit their return. And it's coming straight from the IRS.
The IRS is more focused on helping you finish the process and showing you how your taxes are calculated. It is driven not by that concept of trying to get the maximum refund, but driven by the IRS concept of trying to get the tax return correct.
WSJ tax reporter Richard Rubin walked me through how the new tool works. That's after the break.
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What is the IRS DirectFile pilot and how does it differ from TurboTax or paper filing?
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If you're looking for an option to file your taxes that's not TurboTax or H&R Block, you might be able to use the IRS's new filing tool. WSJ reporter Richard Rubin was able to test it out early, and he joins me to discuss how it went. So Richard, what exactly is this new product from the IRS?
Yeah, so what the IRS has done is created something called DirectFile. And it's a free online service, and it's a pilot, and we'll get into how limited a pilot it is. But it allows you to directly file your taxes with the IRS for free. So it's different from using paid software. It's different from filling out a form on paper. It's different from all the other options that have been out there before. It's an IRS product, an IRS website, and you use it to... guide you through the tax return and then file. This is a pilot. This is not designed to be the alternative this year. It's designed to see how well this works and let the IRS decide whether they want to expand it in the future. So they want to see, for example, how the customer service works.
It'll have a live chat feature. They'll want to see where people get tripped up as they start going through the return. Do they encounter problems or confusion? The goal here is really to learn from what they're doing not to have a mass market product in year one. And the way they described it is like that's like any sort of new product launch. But the idea was to try to find something that would be free and accessible to millions and millions potentially in the future of ordinary Americans who don't want to pay for tax preparation.
And I want to get more into your experience using it. But first off, for this year, what role is this going to play for taxpayers? Who's going to have access to it?
So it's going to be very limited at first. When it opens, it will only be open to invited guests, basically.
Who will be able to use the IRS’s new tax-filing tool this year and when will it expand?
They're reaching out to some state and federal employees, government workers to test it out first. By mid-March, then it will open wider to the public. Still only people in some states and only people with specific features on their tax return that fit within what direct file can do.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–2:03
2
What is the IRS DirectFile pilot and how does it differ from TurboTax or paper filing?
2:03–4:20
3
Who will be able to use the IRS’s new tax-filing tool this year and when will it expand?
4:20–6:31
4
What types of income and returns are supported by DirectFile and who will be excluded?
6:31–9:05
5
How did journalists test DirectFile and what was the hands-on experience like?
9:05–10:26
Speakers
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