19 million taxpayers eligible for free IRS online tax filing program

Nineteen million Americans are able to file their taxes using the IRS’s new free online filing program, according to an estimate released over the weekend by the tax collection agency.

The estimate means that nearly 12 percent of all individually filed tax returns, which totaled 160.6 million in 2022, can be processed for free online.

“For the first time ever, 19 million taxpayers across 12 states can file their taxes online for free direct with the IRS,” Commissioner Danny Werfel said in a video released Saturday.

Previously, the IRS said it expects several hundred thousand people could use the new online system, a substantially lower number than the current eligibility estimate.

Americans overwhelmingly prefer to file their taxes online, though the IRS still accepts paper returns, which regularly pose processing issues for the agency.

In 2022, 93.5 percent of individual returns were filed online, while only 6 percent were done on paper and mailed in.

Of that 93.5 percent filed online, 57 percent were filed using a third party preparer or tax preparation software, 2 percent were filed using the IRS’s old public-private “free file” system, and 41 percent were filed directly or by another electronic channel, according to the IRS data.

The tax prep industry has long viewed a free online public tax filing option as a huge threat to its business, spending millions of dollars lobbying against it. The IRS used to maintain a non-compete clause with several private companies.

The direct file program was greenlighted in the 2022 Inflation Reduction Act (IRA) and is currently being studied by the IRS. That legislation boosted the IRS budget by $80 billion over the subsequent decade, but has since been effectively scaled back by about a quarter through annual appropriations reductions.

The money has been a constant point of contention in the divided Congress, and was immediately rescinded by Republicans in 2023 upon retaking the House from Democrats.

The direct file program is available in 12 states, including California, Texas, Florida and New York.