Here at ATBS, we wanted to provide an update for those who may have questions about the IRS Free File pilot program.
If you haven’t heard, the Internal Revenue Service is proceeding with a pilot program that will allow taxpayers to have their taxes prepared directly through the IRS website as an option along with doing an electronic file or working through a tax professional or other third-party tax preparer.
Residents in select states will have the option to participate in the direct file program, which is being set up as part of the provisions of the Inflation Reduction Act, in the upcoming 2024 tax filing season. The nine states included in the pilot are states that do not have a State Income Tax, including Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. The pilot will also include four states that have a State Income Tax – Arizona, California, Massachusetts, and New York – and in those states, the direct file pilot will incorporate filing state income taxes.
There is no intention for the IRS to require taxpayers to use the direct file option and if the pilot proves successful and the agency moves forward with the program, it will simply be another option for taxpayers in addition to existing avenues to file.
Owner-operators and truck drivers who receive a 1099 will not be eligible for the pilot program. This is because the pilot will not cover all types of income, deductions, or credits. At this point, it’s anticipated that only specific income types, such as wages from Form W-2 and certain tax credits, like the earned income tax credit and the child tax credit, will be covered by the pilot.
Some examples given by the IRS that would disqualify a taxpayer from filing through the direct file pilot would be those receiving the health care premium tax credit or those filing a Schedule C with their tax return. In future years if the agency moves forward beyond the pilot, those could be incorporated into the free file program. However, it may be difficult for the IRS to file for 1099 truck drivers because the IRS would only have gross income and no expense data. Continuing to utilize a preparer who is familiar with trucking is going to remain the best way to capitalize on deductions that help drivers save money on taxes.
Participants who will be invited to use the free file program in the pilot phase will be notified this year. Those participating in the pilot program will have their own dedicated customer service representatives to help them with the filing process.
Truck drivers who are employees and receive a W-2 are encouraged to participate in the program if selected.
Hopefully, this helps clear up any questions or confusion you may have. If you have additional questions, please feel free to contact us.