IRS Set To Rollout Free File Tax Return Pilot In January

Ahead of tax time, the IRS wants to iron out its products first.

The IRS is reportedly planning to release its pilot electronic free file tax return system in January 2024. The rollout will allow select taxpayers across 13 states to try out the new system, according to The Associated Press.

IRS Commissioner Daniel Werfel told the news outlet that the agency has decided to roll out the pilot program in increments to examine “how products like this are rolled out in the private sector.” In order to determine the usefulness of the program, Werfel added how “imperative” it is to make sure it is an “easy- to-understand pilot.” The direct-file pilot participation will be voluntary and completely optional, the IRS previously shared with BLACK ENTERPRISE.

The program was established after the IRS was granted nine months and $15 million from the Inflation Reduction Act to publish a feasibility report. In May, the agency reported on “taxpayer interest in direct file, how the system could work, its potential cost, operational challenges and more,” per AP.

With assistance from nonprofits, congressional offices, and states, the IRS can identify taxpayers who are are eligible to test out the government-run option.

“Our work to evaluate the feasibility of direct file is just one of many examples of how we’re working to transform the IRS,” Werfel said, per AP.

In collaboration with organizations including Code for America, IRS officials are planning to collaborate with Arizona, California, Massachusetts and New York for filing season 2024 to integrate state taxes into the program.

However, the decision to move forward with the dissemination of the pilot has sparked concerns among the industry. From Turbo Tax Live to H&R Block, private tax preparation companies would be competing. Among this group includes Black accountants.

Back in June, BE reported on claims that that free tax prep could hurt Black Americans.The IRS stated in a letter in May 2023 that “Black taxpayers are audited at three to five times the rate of non-Black taxpayers,” an analysis that confirms research by Stanford University.

Critics claims that if the “IRS’ new role is the tax assessor, collector, preparer, and enforcer, that puts more taxpayers from vulnerable communities at risk of being treated unfairly and potentially not receiving their full tax refund,” BE reported.

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