The Internal Revenue Service rolled out new details for how select taxpayers will be able to prepare and file their federal income taxes online directly with the agency for free under a limited test program next year.

The "Direct File" pilot test is expected to be available as an option for some taxpayers in 13 states in 2024. Invitations are likely to be issued to those who can participate. The IRS will roll out more details in the months ahead.

Based on current projections, an IRS official said, the agency anticipates that at least several hundred thousand taxpayers across the country will decide to participate in the pilot, which will be limited to individuals and not include businesses in 2024. Taxpayers who file a Schedule C, for example, cannot participate in the pilot in 2024.

"Not every taxpayer will be able to participate," IRS Commissioner Danny Werfel said Tuesday in a press briefing.

What states will participate in testing IRS Direct File?

Direct File, according to the IRS, will be a mobile-friendly, interview-based service that will work on a mobile phone, laptop, tablet or desktop computer. The service will be available in English and Spanish.

Taxpayers in nine states without a state income tax — Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming — may be eligible to participate in the pilot for their federal return, according to an IRS announcement.

The IRS said Arizona, California, Massachusetts and New York have decided to work with the IRS in the Direct File pilot for filing season 2024 to integrate their state taxes into the pilot.

To make sure the program works effectively, the IRS said, Direct File will first be introduced to a small group of eligible taxpayers in filing season 2024. As the filing season progresses, more eligible taxpayers will be able to access the service to file their 2023 tax returns.

The IRS officials said all states were invited to join its pilot, but some states felt there was not enough time to get ready to participate in the 2024 filing season. More states are likely to participate in 2025, he said, should the program be extended next year.

States that won't participate in the pilot include Illinois, Indiana, Kentucky, Michigan, Ohio, Wisconsin, and elsewhere.

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The goal for the IRS is to use the pilot program to evaluate what could work and identify operational challenges for determining whether a full-scale Direct File project could move forward.

Why is the IRS testing a new program?

The Inflation Reduction Act, signed by President Joe Biden in August 2022, mandated that the IRS conduct a feasibility study to determine how the federal government might develop and run a free, direct electronic filing tax system that's open to all consumers.

The IRS, Werfel said, will be reviewing whether the system is easy to navigate, how well customer service reps are able to answer a question and monitoring the interest from taxpayers to participate in a Direct File program run by the IRS.

The test will aim to focus on tax returns within a limited scope. The IRS anticipates that the pilot might include returns that have such things as W-2 wage income, unemployment compensation, Social Security and railroad retirement income and interest earned of $1,500 or less.

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Tax returns that claim some credits — such as the earned income tax credit, the child tax credit and credit for other dependents — are likely to be welcome to participate.

Werful stressed that Direct File continues to be intended to be just one option for taxpayers. It would not replace options such as working with a tax professional, using the Free File system at IRS.gov, visiting free preparation sites run by trained volunteers, or using commercial software.

And yes, people can still file paper returns, though the IRS encourages electronic filing for faster refunds and processing.

Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on Twitter @tompor.

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