What to Know About the IRS Direct File Pilot Program and Its Future
The IRS has always faced pressure to make filing taxes easier, cheaper, and less stressful. In 2024, it tested a new system called Direct File, giving eligible taxpayers in a handful of states the chance to file their federal returns online directly with the IRS at no cost. That pilot run drew hundreds of thousands of participants, issued millions in refunds, and convinced the agency to make Direct File permanent starting in the 2025 tax season.
How the Direct File Pilot Worked
Direct File debuted as an IRS-built online platform, available twenty-four hours a day in English and Spanish. Taxpayers in twelve pilot states could log in, verify their identity, and work through a guided return process. The tool supported basic income like W-2 wages, limited bank interest, unemployment compensation, and Social Security. It also allowed certain credits and adjustments, including the standard deduction, child tax credit, earned income tax credit, student loan interest deduction, and educator expenses.
The focus was on simplicity. Once taxpayers entered their data, the system checked for errors, transmitted the return, and issued confirmation emails when the IRS accepted it. Refunds could be deposited directly, and balances owed could be paid online. More than 140,000 returns were filed this way during the pilot, with over ninety million dollars refunded and more than thirty-five million collected in payments.
Eligibility, however, remained strict. The system excluded self-employment income, investment sales, rental property, and other common sources. Itemized deductions were off the table, as were less common credits. The pilot also didn’t handle amended returns, meaning taxpayers who discovered mistakes had to look elsewhere. Customer support was limited to technical assistance and basic tax law questions. Agents had no access to taxpayer accounts and could not provide personalized advice.
Another limitation was state and local filing. Direct File covered federal returns only. In states without income tax, that wasn’t a problem. In states that partnered with the IRS, the system created a handoff so federal data could be imported into state filing software. But Ohio was not part of the pilot. That left state and local returns entirely in the hands of taxpayers, software companies, or professionals.
Benefits and Drawbacks for Taxpayers
The strongest benefit of Direct File is cost. For people with simple returns, it eliminates the need to buy commercial software or pay a preparer. The tool is free, straightforward, and available at all hours. It can save money and time for taxpayers who just need a plain Form 1040 filed without complications.
Convenience is another selling point. Instead of navigating third-party interfaces or marketing upsells, taxpayers deal directly with the IRS. Refunds still follow the standard timetable, and online payment options simplify settling balances. For filers who only need to claim wages, limited interest, and a couple of credits, the process is relatively painless.
But these advantages disappear once life gets more complicated. Side income from driving for a rideshare app, selling goods online, or freelancing pushes you into Schedule C territory. Investment income, stock sales, or cryptocurrency transactions bring in rules and reporting requirements Direct File doesn’t yet cover. Families that itemize deductions for medical expenses, mortgage interest, or charitable contributions won’t fit either.
Ohio taxpayers face additional hurdles. The state requires an income tax return for most residents, plus potential school district and city returns. Those filings cannot be done through Direct File. Instead, taxpayers must prepare them separately—often with different systems and passwords. That creates duplicate data entry and increases the chance for mismatches. Even if federal filing becomes free and simple, state and local filings still demand coordination.
What to Expect Moving Forward
The IRS has committed to making Direct File permanent starting in 2025. That means every taxpayer will hear about it, even if not everyone can use it. Expansion is expected, though the pace and scope remain uncertain. The IRS will likely broaden the categories of income, deductions, and credits the tool supports. It may also improve integration with state systems, making it easier to flow data from federal to state returns.
For Ohio filers, the main question is whether the state will participate in that integration. If Ohio creates a secure handoff from federal Direct File into its online filing system, taxpayers could reduce duplicate entry and speed up filing. Taxpayers who want to try Direct File in 2025 should prepare now. Setting up an IRS online account, verifying identity, and gathering last year’s return will smooth the process. Keeping W-2s, 1099s, and other documents organized will help avoid delays. Those who expect refunds should confirm bank information is up to date for direct deposit. Those who owe should explore electronic payment methods to avoid penalties and interest.
If you are unsure whether Direct File fits your situation, or if you want coordinated handling of federal, state, and local filings, Gudorf Tax Group, LLC can help. Our team guides Ohio taxpayers through every stage of the process, from tax preparation, filing accurately, to planning for the future. Reach out today to learn how we can make tax season less stressful and more predictable.
