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Pilot program allows taxpayers in 12 states to file federal returns directly to IRS

MICHEL MARTIN, BYLINE: It's tax season. And if you're thinking about switching up how you file your taxes this year, the Internal Revenue Service might have you covered. The government agency has launched a pilot program in 12 states that allows eligible taxpayers to file federal returns directly with the IRS, online and for free. Direct File marks an effort to create a free government alternative to private filing services like TurboTax and H&R Block. Joining us to talk about this new program is tax law and policy expert Ariel Jurow Kleiman. Professor Jurow Kleiman, thanks so much for joining us.

ARIEL JUROW KLEIMAN: Thanks so much for having me. I'm thrilled to be here.

MARTIN: So who is eligible for this?

JUROW KLEIMAN: This year, eligibility is limited. It's not based on how much you earn, but it's based on what type of income you earn. So folks who earn wage income can use it. People that get Social Security income, unemployment income, a tiny bit of interest income - you'd be able to use it. Otherwise if you're a freelancer or gig worker, if you have a small business, those types of income won't be eligible. And then just a few types of credits and deductions are eligible.

MARTIN: I think it might be surprising to people that it's taken this long to get a free federal filing system. As a person who studies this, can you help us understand, like, why has it taken this long?

JUROW KLEIMAN: I think that's exactly right. I think a lot of people are really baffled as to why it's taken this long. I think the big reason is just IRS capacity. You know, like, it takes money and manpower to create something like this. And historically, the IRS has not had much of either of those things. They did, about 20 years ago, try to create a public filing system, an internet-based filing system. And it didn't go well. They didn't have enough resources to do it. They weren't the experts in it at the time. And so that was when they started this Free File Alliance. And as part of that program - so they started a partnership with these private tax software companies. And the IRS agreed to not create a public filing system. And that's been a big reason why this has never been developed. In 2019, there was some conflict about some members of free file charging folks who should have been eligible for free services. And at that point, they took the limitation out of the contract. So the IRS in 2019 was then able to create a public filing system. And that's when, you know, folks started thinking about whether they should do it or not.

MARTIN: Taxes are - it's not simple. It's not simple. I guess the bottom line question is, is this going to make our lives better? If you're eligible for this, is your life going to be better?

JUROW KLEIMAN: I mean, I - first of all, I completely agree. The tax system is incredibly complicated. I could not prepare a return without the use of tax software. I love good tax software. It'll make accessing the tax system, like I said, free. It'll help with privacy and security. It's not going to change our tax laws. So if somebody has a hard time understanding if they're eligible for the earned income tax credit, for instance, direct file is not going to make that simpler. It offers like a simple to access, you know, portal for folks to use. So in that sense, it might make it a little simpler, but it's not going to make the tax laws less complex.

MARTIN: Do you have a sense of when this might be more widely available, assuming that the pilot is a success?

JUROW KLEIMAN: So for this year, I was told that the goal is mid-March to open it up to, you know, everyone who's eligible still with those income and credit limits that I mentioned. And then I think in future years, they're hoping to expand it to other folks that aren't eligible to use it this year. So like, you know, maybe gig workers and freelancers, maybe folks with, like, canceled debt income or pension income in future years. I think that's the next big group that we would hope to see able to use it.

MARTIN: That is Ariel Jurow Kleiman. She's professor of law at the Loyola Law School at Loyola Marymount University. Professor Jurow Kleiman, thank you so much for joining us.

JUROW KLEIMAN: Thanks for having me. Transcript provided by NPR, Copyright NPR.

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