I'm a tech worker with a simple W2 and 401K and a student loan I'm still paying off every year and this Direct File experience was my favorite.
It was so clean. So simple. I could understand every single step of it, even the helpful breakdowns along the way. Bonus: No bullshit screens holding you up while it "checks the accuracy" or "finishes things up" like other tax prep software does if only to make you feel like you're getting your moneys' worth out of it when it already computed those numbers 5 hours ago.
I had one (major) snag with the NY filing side which was fixed revolving around data transfer (and I suspect I was filing early enough in the program I caught it 'first' so it took a little longer to fix), so I hope that helped everyone else in NY that got to use it!
I legitimately cannot wait to file my taxes again next year with this system.
EDIT: Here, I know it's silly, but here's a (redacted) screenshot of my whopping $73 refund from the government: https://i.imgur.com/9FoxRts.png - nice, simple English breakdowns are... so good.
Those screenshots are really helpful. I hope this improves people’s understanding of their taxes.
There are so many posts on /r/personalfinance where people claim they “paid $0 on taxes this year”. What they typically mean is that they owed nothing when they filed a return, or received a refund.
They still paid taxes, it was simply taken out of their paycheques and paid in full by year end.
> Bonus: No bullshit screens holding you up while it "checks the accuracy" or "finishes things up" like other tax prep software does if only to make you feel like you're getting your moneys' worth out of it when it already computed those numbers 5 hours ago.
That's awesome!
One of my big pet peeves around TurboTax is the way is intentionally pauses my multi-core, hyper-threaded, zillion gigahertz computers from doing 1960's level calculations (IF user checked off option A, then multiply by whatever)... so that it can look like it's busy.
Congrats to Intuit for fully automating the process of "looking busy for the boss", I guess.
I went from zero to filed in 11 minutes on the federal side. Amazingly fast.
For the state side it's a little more complex (because of Events), but essentially the flow is to wait for the IRS to accept the Direct File first (which took only 2 minutes). Which also meant - holy hell, the IRS has already signed off on my tax return, basically, which kicks off the refund flow. Once that happened, I was invited to continue the data transfer and approve an IRS Oauth-esque flow to send data onwards to FileMyStateTaxes.
I assume now that I fixed the snags this time around next year the state side should also only take about 10 more minutes.
About time. I'm tired of all the tax filing sites that lure you in with claims of "Free!" but then tell you 90% of the way through that "oh, you are a special case, so you need to pony up $100 or so to continue".
I've used the Free Fillable Forms option before, but that places a large burden on you to get everything right. Direct File will solve a lot of issues.
I moved from one of those ripoff tax sites (TaxACT) to FreeTaxUSA last year, way too late. Looking back at my records, I paid TaxACT $9.95 to file my taxes in 2007, and that number has been steadily rising ever since:
2011: $17.95
2016: $49.98
2018: $66.95
2019: $97.90
2022: $124.90
2023: $133.95
I mean, yes, my taxes got a little more complicated over the years, but not 13X more complicated. I don't see how these guys justify this price trajectory.
FreeTaxUSA is pretty great. I've used it for 2 or 3 years now. Would definitely recommend, and it is getting better each year at making the process easier in my experience.
I tend to pay a little bit extra for services I don't necessarily need but whatever. Like Deluxe. It's way cheaper than what I would pay for a professional to do it, and still less than I'd pay for Turbo Tax or similar. As long as the quality of the app keeps going up and the price gouging stays out, I'll keep using it.
TaxAct quoted me close to $200 in fees because of my wife's business. With FreeTaxUSA I had a fantastic experience this year for like $14.99 because we pay state income taxes.
Another big gotcha I've run into is that the federal return is free... but then you have to pay $$ to file your state return. Which you only find out after you've done 100% of your federal return.
Which is just infuriating, because obviously (nearly) everyone has to file both.
It's like a restaurant telling you all their soda is free, but then it turns out they charge $3 for the paper cup it comes in, and you're required to use their paper cups.
> their soda is free, but then it turns out they charge $3 for the paper cup it comes in, and you're required to use their paper cups.
You're not required to use their software to file the state return though. You can file the federal return and do the state return yourself. Many states like NC rarely have any steps beyond copying the federal AGI and multiplying by the state tax rate for common situations.
You're not required to use it for federal filing either though, so that's missing the point.
You're signing up to file your taxes for free and spend a couple hours inputting all the info, and then discover you'll have to pay or else now do your state taxes separately on paper and mail them in, taking another hour.
Who is the one actually charging for the state-filing, where is the money going? Is it the state, or the service provider?
This also reminds me of my apartment building, which has an “amenity fee” of $100/month for rooftop+gym usage, on top of the normal advertised rent. In the leasing office, I asked for details about it, and was told it’s a “non-optional” required fee which everybody has to pay. Stuff like that should be illegal - the only reason they would do that is to advertise lower rent.
It’s the service provider. You can file directly (paper forms, some states digital forms) with your state for free, but TurboTax et al charge you for it.
You can always file your taxes for free - you just get the forms and fill them out. In reality, that's essentially impossible or a waste of time for anyone with even slightly complex tax affairs so you're paying for preparation services - I have 57 pages of tax returns for this year, for example.
Yes, the tax prep industry is a scam. Luckily, you don't have to use it. In my experience (Minnesota), the state return is super easy. Just print out the form, copy some values from the federal, do a little 5th grade math, and mail it in.
(Personally, I also do my federal taxes manually, with the IRS's Free Fillable Forms. But either way, there's no need to pay for the state forms.)
This is great news, and while the limited nature of the program makes it look like a baby step, I can imagine the political headwinds (Intuit and Block) made this "going from zero to one" moment a huge challenge. Looking forward to seeing them expand to support more tax scenarios, more forms, and remove the income cap for eligibility. Would also be great if they expanded to support state tax filing.
Eventually the goal is that it pulls in all the different forms and edge cases of the tax code but it's not there yet.
Currently it's just basic "W-2, (maybe a 401k), and basically nothing else" but the trial was also intentionally limited to a small portion of the tax base to keep the project from biting off more than they could chew for the first year.
But yes in the next ~5-10 years as long as the next admin doesn't cancel it, this will probably be a default "public option" for everyone.
>Is this really a “public option” for everyone to file their taxes?
No; this is really an MVP. It doesn't work for people with certain types of income (including gig workers), for higher incomes, for cases where you need to itemize deductions etc etc
It's not - anyone with nonstandard deductions or a 1099 form (read: gig workers) was not eligible and the data shows it. 141,000 households from states with 150 millions total population, what a rousing success! In the upcoming years the week-kneed government is going to work with more states and gradually expand the complexity of returns. It's not useful at the moment, and looking over the press release won't be for a few more years.
And then there's the state return, which is not free. The federal government gets a few brownie points, but the tax preparation industry still gets its pound of flesh. It's really unimpressive, it's politics that no one is better off with.
A couple helpful tips I've learned as I've had to prepare increasingly complicated returns for myself:
For basic returns, FreeTaxUSA has been the best "tax prep service" I've used, UI is simple enough and there are no hidden fees from what I've experienced.
And the most helpful of all is using the IRS's own portal to see everything that is on file for you - this is especially helpful if you have a lot of non-standard income and you're not 100% sure if you've filed everything the IRS expects you to - https://www.irs.gov/individuals/get-transcript
> And the most helpful of all is using the IRS's own portal to see everything that is on file for you
My tax guy uses this, but it should be noted that they don't have all the forms until after the filing deadline. You still have to file an extension and pay if you owe anything before that portal is available.
Lobbyists and also some (actually a lot of) the GOP believes that if it's too easy to file taxes, then it will be too easy to raise taxes. They feel like the pain keeps people anti-tax, which works to their anti-tax agenda.
Have you ever wondered why the withholding is required to be called out separately on your paycheck, and it's not just paid on your behalf? It's because they want you to look at your paystub and get mad at all the deductions.
And people used to have make quarterly statements, they switched it because it was cheaper to make the employer do it instead of enforcing when people forgot.
> Have you ever wondered why the withholding is required to be called out separately on your paycheck, and it's not just paid on your behalf? It's because they want you to look at your paystub and get mad at all the deductions.
This sounds like nonsense. Did you read this somewhere credible? You need to know how much has been withheld because you might have multiple jobs during the year and the tax is bracketed depending on your total income during the year. If they hid that information during the year, people wouldn't have the documentation they need to figure out if they need to adjust their withholding to avoid a penalty (or a free government loan).
I can't find them now, but yes, they were direct quotes from GOP House members about wanting people to feel the pain of taxes to make it harder to raise them.
And you don't need to see your social security and medicare taxes on each stub, because you can't change their withholding. You only need it on your W2. And in fact your employer pays half of those taxes already. That was the compromise. That your employer pays half, which you don't see, and you pay the other other half.
They could have easily had your employer pay the full amount and then you'd just make less, but they purposely did it this way so that you get mad about how much the tax is.
Okay, but if you're talking about the social security and Medicare portions then that... only explains those portions, no? The comment above made it seem like it's talking about all income tax, which wouldn't make sense.
It's your money, I think it's reasonable to see what it is being withheld for. These days with most payroll being direct deposited I don't think many people look at their pay stubs anymore anyway. At least I know I don't; maybe I would if I were paid by the hour, just to verify that all the hours were counted.
I'm just saying, if anyone wanted to keep taxes "painful" they would not have implemented withholding in the first place. It's more painful to have to pay "out of pocket" than to have the money taken before you ever see it.
Is it really my money if it's immediately going to the government before it hits my bank account? Is it really my money if I am subject to fines, wage garnishment, repossession, or prison if I fail to give it to them? The government could greatly simply my taxes if income tax is just rolled up into payroll tax. My employer is already paying payroll tax on my behalf so why not just pay more of it and lower my salary to compensate?
> These days with most payroll being direct deposited I don't think many people look at their pay stubs anymore anyway.
Am I really the only one who downloads their entire paystub every paycheck and enters all the tax numbers, benefits lines, 401K deductions and so on into a spreadsheet or Quicken so I can check on accuracy and tally everything up at the end of each year? I've found errors once or twice by doing this. Come on, there must at least be dozens of us, out of hundreds of millions of employees, who do this...
I see in the costs that a substantial portion of the costs were advisory/contract work. I'm assuming that was mostly through the GSA based on the mention of the US Digital Service?
It's honestly really nice to see the GSA getting relied on by agencies to do infrastructure and web design because they have gotten really good at it (and an overwhelming majority of their work is heavily open sourced).
It was also interesting to see the comments made that they are considering eventually open sourcing tax computations. That would be massive.
I look forward to when they support filing for a LLC (sole owner) along with a W2.
I've used an accountant the last 2 years for filing because starting my LLC kicked my taxes up a notch into an area that I do not feel comfortable doing myself (via paid products). After I saw it done once for me it looked like it wasn't too bad but still not something I would do without software. Most of the work was just itemizing and categorizing expenses.
FreeTaxUSA supports it - I did it for my wife's LLC this year. You can do the federal taxes for free, but you will have to pay $14.99 for the state taxes (if you want to). The LLC has nothing to do with it, every customer gets the full feature set for the same price.
I do my taxes on paper because the paid products want to charge you more if you have self-emploment income. I have done my own Schedule C and self-employment taxes. It's not bad. A single-owner LLC is a "pass through" entity as far as the IRS is concerned. It's just another source of self-employment income.
The first year there was some anxiety as to whether I was doing it right, but I've never gotten any notices about errors for that so I assume it's all good....
If you haven't, check out the Free Fillable Forms from the IRS. It's basically the same as the paper forms, but you don't have to shuffle actual paper around and you can just submit it online.
I tried to do one of the big guy's 'free filing'. Did their wizard. It said I didn't qualify. Went to the IRS website, clicked through the IRS link to the same company's free filing. This time I qualified. I hate these companies and their business practices of confusing users into paying, or paying more than needed, they can't die soon enough.
It still doesn't fill out all the information they already have though, right? You're still copying your employer and E-Trade/whomever information in, yes? I really dislike having to carefully copy over the two or three forms needed to cover the half dozen investment-rebalance-related trades that I do in a year.
Are there any signs of hope this will get better? Direct File seems to be going well so hopefully it increases general will to do stuff.
The coming supply-demand adjustment is welcome even for people who don't use the service. In the long run, price pressure will improve quality and reduce prices for tax preparation.
Since the tax preparation fee itself is presently a $20,000,000,000 private tax on the US economy, that's wonderful news.
But in the short-run, let's all look forward to the intense fear-mongering which is going to come from the ever-benevolent TurboTax marketing department...
You've been able to file online for decades. You could either fill out the digital forms manually, doing all the calculations yourself (this is what I do, personally); or, you could pay a private tax prep company to use their user-friendly tax prep software that will ask relevant questions and do the math for you.
What's new here is the IRS providing the user-friendly tax prep software, at no cost to the user. It's still "in beta" (so to speak) though, so it doesn't yet support many tax situations.
The tax prep industry spent more than $93 million on federal lobbying to prevent direct file since the 2003 launch of the Free File Program.
“Direct File is not free tax preparation, but rather a thinly veiled scheme where billions of taxpayer dollars will be unnecessarily used to pay for something already completely free of charge today — free to the taxpayer and actually free for the government,” said Intuit’s spokesperson Tania Mercado
Better than needing to pay a third party for the pleasure. Taxes are a fact of life. Anything that reduces the number of rent seekers between me and the government is a win in my book.
It was so clean. So simple. I could understand every single step of it, even the helpful breakdowns along the way. Bonus: No bullshit screens holding you up while it "checks the accuracy" or "finishes things up" like other tax prep software does if only to make you feel like you're getting your moneys' worth out of it when it already computed those numbers 5 hours ago.
I had one (major) snag with the NY filing side which was fixed revolving around data transfer (and I suspect I was filing early enough in the program I caught it 'first' so it took a little longer to fix), so I hope that helped everyone else in NY that got to use it!
I legitimately cannot wait to file my taxes again next year with this system.
EDIT: Here, I know it's silly, but here's a (redacted) screenshot of my whopping $73 refund from the government: https://i.imgur.com/9FoxRts.png - nice, simple English breakdowns are... so good.