Connecticut joins IRS Direct File free tax prep system

The Treasury Department and the Internal Revenue Service said Friday that Connecticut will be the latest state to join the IRS Direct File program for free tax preparation. 

Last week, New Mexico joined the roster after Oregon, New Jersey and Pennsylvania also joined in recent weeks and months after 12 other states tested it this past tax season.

“The Direct File tool will make it easier and more convenient for the average person to file their taxes, and it will help them save both time and money by avoiding the need to purchase for-profit tax filing software,” said Connecticut Governor Ned Lamont in a statement. “We’re grateful to the U.S. Department of the Treasury and the Internal Revenue Service for making this resource a reality, and we appreciate that Connecticut residents will benefit from this service in the upcoming filing season.”

The free online filing system was pilot tested last tax season in 12 states, and the IRS announced plans in May to make the program permanent. It invited all 50 states, as well as the District of Columbia, to join the program. The dozen states where it was available this filing season include Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming. 

At least 290,000 people will be eligible to use the system in Connecticut. “Thanks to President Biden’s Inflation Reduction Act, more than 290,000 Connecticut taxpayers will be able to file their taxes online for free, directly with the IRS this coming filing season,” said Treasury Secretary Janet Yellen in a statement. “Direct File will save Connecticut residents time and money and help ensure they receive the tax benefits they are owed. After a successful pilot this filing season, we are pleased to expand the program as a permanent offering and welcome Connecticut as the latest new state to offer this free option to taxpayers.” 

However, the expansion of the program has been blasted by a group of Republican senators, led by Senate Finance Committee ranking member Sen. Mike Crapo, R-Idaho, and Finance Committee member Sen. John Barrasso, R-Wyoming, who sent a letter last week to IRS Commissioner Danny Werfel. 

“We write with serious concerns regarding your agency’s recent unilateral and unauthorized action to create a permanent Internal Revenue Service (IRS) Direct File tax preparation program… The American people do not want an all-encompassing IRS acting simultaneously as the tax collector, tax auditor, tax enforcer and tax preparer,” the senators wrote. “Taxpayers already have access to numerous free tax-filing options and dozens of national non-profit entities offer tax preparation services at no cost… The IRS does not have unlimited resources and should focus on improving information technology systems, data privacy and long-standing customer service issues.”

They noted that less than 140,000 taxpayers utilized the program, far short of the expected 300,000 participants, and even farther short of the potential user pool. Of the estimated 19 million eligible tax filers from 12 selected states, only 0.7% of taxpayers used the program, they pointed out. They also said the relevant provision in the Inflation Reduction Act only authorized a feasibility study, not the creation of a federal tax program.

The IRS, for its part, said the pilot exceeded expectations with more than 140,000 Americans successfully filing in the five weeks the program was widely available following extensive product testing. Filers claimed more than $90 million in refunds and saved an estimated $5.6 million in tax preparation fees on their federal returns alone.