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American Military News
6 days ago
- Business
- American Military News
IRS Direct File will be cancelled if Republican tax bill becomes law
The $3.8 trillion Republican tax bill that just passed the House includes a provision to kill off the popular IRS Direct File program, which lets people file their federal income tax returns for free online. The bill still needs to pass the Senate to become law, but if the bill is enacted as currently written, the Direct File program is slated to be eliminated within 30 days of the law's passage. The bill also requires the U.S. Treasury Department to create a task force to design a partnership between the IRS and private-sector tax service providers. The task force would need to identify ways to replace any 'free file programs and direct e-file tax return systems.' That includes the IRS Free File program, an existing public-private partnership. IRS Direct File, which is separate from the Free File program, is a popular free option that offers guidance and support as you fill out your federal income tax return and file your taxes directly with the IRS. Most taxpayers have rated the Direct File program positively: About 90% of taxpayers said their experience was excellent or above average, according to a survey by the General Services Administration of about 11,000 Direct File users in 2024. On top of that, interest in the program is clear: About 73% of taxpayers said they'd be somewhat or very interested in using Direct File, according to a Tax Policy Center report in March, based on a survey of taxpayers aged 18 to 64. The Direct File program has been in Republican lawmakers' crosshairs for a while. In December, almost 30 Republican lawmakers sent a letter to President-elect Donald Trump, calling for him to end the Direct File program on his first day in office. Lawmakers in the U.S. House of Representatives introduced legislation last July to end the Direct File program. Elon Musk, de facto head of the 'Department of Government Efficiency,' or DOGE — also isn't a fan of the program. In February, he posted on social media that the government tech office that developed the Direct File program had been 'deleted.' Currently, the IRS's Direct File page is still up and running. Direct File doubled its reach to 25 states for the 2025 tax season, up from 12 states in 2024, the program's pilot year. An estimated 30 million taxpayers qualify for the Direct File program in 2025, the IRS says. More than 140,000 taxpayers filed their federal tax returns through the Direct File program in 2024. The Direct File program also expanded to accept more types of tax situations for the 2025 tax season. While taxpayers who used the system in 2024 could claim a handful of tax credits, including the earned income tax credit and the child tax credit, that list expanded for this filing season to include the child and dependent care credit, among others. However, taxpayers who want to claim other tax credits, such as the American Opportunity Tax Credit for higher education costs, or the tax credit for the costs of adopting a child, won't qualify for Direct File. And if you're hoping to deduct IRA contributions, Direct File doesn't support that. (See the full list of credits and deductions supported by Direct File on this IRS page.) The Direct File program, now in its second year, allows taxpayers to file their federal tax returns electronically with the IRS. The no-cost tool guides taxpayers through every part of their federal income tax return. Taxpayers can file using a smartphone, computer or tablet. One of the program's advantages is that, if you have questions as you're working on your return, you can get live support directly from the IRS via chat or phone. IRS representatives can answer basic tax questions and help with technical issues in English and Spanish. The Direct File program has income limits, as well as limits on the types of income, deductions and credits you can enter on your tax return. For the 2025 tax season: —Your income must be less than $200,000 (less than $168,600 if you have more than one employer), and if you're married filing jointly, your spouse's income also must fall below these limits. —If you're married filing jointly, your combined income must be less than $250,000. —If you're married and file separately from your spouse, your income must be less than $125,000. To be eligible for Direct File, your income can come from the following sources: —W-2 wages —Social Security income —Unemployment compensation —Interest income —Retirement income (reported on a 1099-R — limited eligibility starts March 2025) But if you're self-employed, or have business or rental income, you can't use Direct File. Same goes for IRA contributions or distributions: If you have either, you can't use Direct File. You can use the IRS Direct File program only if you claim the standard deduction — the program isn't available to people who itemize. But you can claim certain above-the-line deductions: student loan interest, educator expenses and health savings account contributions. You can't use Direct File if you want to deduct your IRA contributions. The Direct File program supports the following tax credits in 2025: —Earned income tax credit —Child tax credit —Credit for other dependents —Child and dependent care credit —Premium tax credit —Credit for the elderly or disabled —Retirement savings contribution credit However, if you want to claim education credits, credits for energy efficient home upgrades or the adoption expense credit, you can't use the Direct File program. More taxpayers will have access to the IRS Direct File program in 2025. In 2024, the IRS kicked off the program with only 12 states; that number has expanded to 25 states for the 2025 tax season. For some of the states that participate in the IRS Direct File program, your federal return information will be transferred automatically to the state tax website, but in some cases you'll have to re-enter your information. Visit this IRS Direct File page to get the details for your state. Here is a list of the participating states: Alaska, Arizona, California, Connecticut, Florida, Idaho, Illinois, Kansas, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming If you don't qualify for the IRS Direct File program, you may have other options to file your tax return for free. In addition to Direct File, the IRS offers the Free File program, in which it partners with online tax software providers to provide free federal income tax return filing. Some providers also allow you to file a state income tax return. For the 2025 tax season, your adjusted gross income must be $84,000 or less to qualify for the Free File program. That AGI applies to any filing status: married filing jointly, single, head of household, etc. The IRS also offers the Volunteer Income Tax Assistance (VITA) program, which provides certified volunteers to prepare basic tax returns if you earn less than $67,000 a year, are disabled, or speak limited English. You can find a site near you by visiting this IRS page. ___ © 2025 Distributed by Tribune Content Agency, LLC.
Forbes
14-05-2025
- Business
- Forbes
House Tax Plan Would Kill Direct File And Rescue Controversial Contingency Fees
NORTH HALEDON, NJ - APRIL 15: In this photo illustration, a 1040 U.S. Individual Income Tax Return document is seen on a desk on April 15, 2024 in North Haledon, New Jersey. (Photo illustration by) If you were expecting the budget reconciliation process to be easy, you haven't been paying attention. Several committees are working on language related to the bill, including Agriculture, Energy and Commerce, and Ways and Means. Each of those committees will also consider amendments, proposals, and markups. That means there are several working parts and, in some cases, different priorities. Add-ons like plans to nix IRS Direct File may not have been included in early drafts, but appear as the process churns on. Even as the Energy and Commerce Committee considered significant changes to Medicaid, including work requirements, most of the tax-specific language will come from the Ways and Means Committee. The committee released a draft version of the bill over the weekend, and a substitute amendment was made public on Monday—you can read a summary of some of the early highlights here. Included in the substitute amendment were a few IRS-specific provisions that did not appear in the original draft. At the top of the list? Eliminating IRS Direct File. The language in the amendment requires the Treasury to ensure that the IRS Direct File program has been "terminated" no later than 30 days after the enactment of this Act. That isn't all. The bill would then require creating a task force to "design a better public-private partnership between the IRS and private sector tax preparation services" to replace Free File and Direct File. Under the amendment, the task force is directed to report on "1) the cost of a new public-private partnership to provide for free tax filing for up to 70 percent of all taxpayers calculated by adjusted gross income to replace free file and any IRS- run direct file programs; (2) taxpayer opinions and preferences regarding a taxpayer-funded, government-run service or a free service provided by the private sector; (3) assessment of the feasibility of a new approach, how to make the options consistent and simple for taxpayers across all participating providers, how to provide features to address taxpayer needs, and how much money should be appropriated to advertise the new option.' The amount of money earmarked is $15,000,000. If you're feeling a bit of deja vu, you're not wrong. The Inflation Reduction Act of 2021 also created a task force to design a direct file tax return system. The task force was required to explore the "(I) the cost (including options for differential coverage based on taxpayer adjusted gross income and return complexity) of developing and running a free direct efile tax return system, including costs to build and administer each release, with a focus on multi-lingual and mobile-friendly features and safeguards for taxpayer data; (II) taxpayer opinions, expectations, and level of trust, based on surveys, for such a free direct efile system; and (III) the opinions of an independent third-party on the overall feasibility, approach, schedule, cost, organizational design, and Internal Revenue Service capacity to deliver such a direct efile tax return system." The cost? Also $15,000,000. (Apparently, it was such a good idea that the House wants to gut it and do it all over again.) The result of the IRA was a limited-scope pilot of Direct File, which debuted in 2024. The pilot, the IRS claimed, was a success. The tax agency said that Direct File users reported a high degree of satisfaction and quick answers to their filing questions. After the first year, the Treasury Department declared that Direct File would be a permanent, free tax filing option. The IRS also expanded the program in 2025 to include more states and the ability to handle more kinds of income, credits, and deductions. Following the 2024 election, Musk and Vivek Ramaswamy, at that time leaders of the Department of Government Efficiency (DOGE), reportedly discussed creating a mobile app for Americans to file their taxes for free with the IRS. That program already existed—Direct File. In 2025, the program found itself in DOGE crosshairs when Musk posted on X (formerly Twitter) that he had "deleted" 18F, the group responsible for creating the technology behind Direct File. Critics of Direct File point to Free File, an existing program offered as part of a public-private partnership between the IRS and Free File Inc., formerly the Free File Alliance. Through this partnership, tax preparation and filing software providers make their online products available to eligible taxpayers (as compared to Direct File, an IRS program). Free File debuted in 2003 and was occasionally marred by allegations that participating tax software companies, including TurboTax and H&R Block, hid free options to get taxpayers to pay for services. The allegations created quite a stir—and resulted in litigation. Today, tax preparation software companies are prohibited from hiding free filing services from Google or other search results pages. Following the changes, Intuit and H&R Block opted out of the program. While Free File remains on the books, the current administration has already signaled that it will eliminate Direct File. A Congressional move would make it official. Access to taxpayer data is tightly restricted by law—a protection that's been in the news recently because of demands by DOGE to access that data. In 2024, a former IRS contractor was sentenced to five years in prison for disclosing thousands of tax returns, including Donald Trump's tax returns, without authorization. That contractor, Charles Littlejohn, pleaded guilty to unauthorized disclosure of tax return and return information—a violation of section 7213(a)(1) of the tax code, the most serious offense for leaking tax information. Littlejohn had faced—and was sentenced to—the maximum penalty of five years in prison. That was true even though Littlejohn leaked information for multiple taxpayers. The substitute amendment would increase the penalties for violating section 7213(a) from "$5,000, or imprisonment of not more than 5 years" to "$250,000, or imprisonment of not more than 10 years." The language in the bill would also expand the punishment. Currently, a leak is generally considered a single violation. Under the language in the amendment, when there are multiple disclosures, as in the case of Littlejohn, the disclosure of information for each affected taxpayer would be considered a separate violation. Language in the amendment would also put the brakes on efforts to "regulate, prohibit, or restrict the use of a contingent fee" in connection with tax returns or claims for refund. Contingent fees typically represent a percentage of an amount received—in the context of lawsuits, you tend to see them as a percentage of the total award. When it comes to tax returns, they may be a percentage of the expected refund or a percentage of tax "savings"—however that is defined. Earlier this year, Treasury and the IRS released proposed regulations to update the rules for certain tax professionals, including attorneys, certified public accountants (CPAs), and enrolled agents (EAs) who can practice before the IRS. These rules have long been found in Treasury Department Circular 230. Rules published in 2007 prohibited tax professionals from charging contingent fees for original returns but permitted practitioners to charge a contingent fee for certain services rendered in connection with an audit or challenge to an original tax return, amended returns, or claims for refund or credit. Treasury and the IRS subsequently clarified the 2007 amendments in 2008 and proposed modifications in 2009. The 2009 proposed regulations were never finalized. The IRS has continued to bump up against contingent fees. The section of Circular 230 that prohibits practitioners from entering into contingent fee arrangements for services rendered in connection with a "matter before the IRS" would be removed under the proposed regulations. However, the term "disreputable conduct" would include charging contingent fees for preparing an original or amended tax return or claim for refund or credit, as well as charging fees that are unconscionable under the facts and circumstances. The American Institute for Certified Public Accountants (AICPA) Code of Professional Conduct prohibits CPAs from charging contingent fees for preparing original returns, amended returns, and ordinary refund claims because of the risk that these arrangements would allow a CPA to improperly benefit from the transaction. Many state accountancy board rules also ban contingent fee arrangements for preparing an original or amended return or claim for refund or credit. Here's why the IRS doesn't like these fees. A contingent fee based on getting a big refund may encourage evasion or abuse of tax laws by incentivizing practitioners to take unduly aggressive tax positions. That gives the practitioner "a direct, financial interest in the tax benefits of a client." And that, says the IRS, is "incompatible with ethical practice" before the Treasury Department or the IRS under Circular 230. Contingent fees have recently gotten a second look because of employee retention credits (ERC). Those assisting companies with ERC applications often took a contingent fee—typically, a percentage of the refund due the taxpayer. The IRS encouraged taxpayers to be wary of promoters who charged a contingent fee because of concerns that the economic driver could push promoters to suggest ineligible people file a claim for the credit and that they might not inform taxpayers that they must reduce the wage deductions they claimed on their federal income tax return by the amount of the credit. Especially in cases where the contingent fee is collected upfront, the IRS has warned that in the case of an ERC denial (or audit), the taxpayer may be stuck with a reduced credit or penalty—and out the contingent fee. The ERC contingency fees were also in the news because it has been widely reported that some tax firms paid Trump's nominee for IRS Commissioner, Billy Long, on a contingency basis. Expect that issue to come up again while contingent fees are still considered controversial. Green-lighting contingency fees by banning regulations or restrictions would change the conversation. Long's confirmation hearing is scheduled for May 20, 2025. You can see the original draft version of the bill before the markup here. The Smith amendment version is here. The bill is still working its way through the House where Republicans hold a slim majority. Even it's approved, the House bill must conform with the Senate version to be signed into law. Keep checking our coverage for more details.
Politico
14-05-2025
- Business
- Politico
‘Glaring red flag': Treasury DOGE team discloses bank stock holdings
The Trump administration official overseeing the Treasury Department's massive financial operations reported owning stock in many of the large banks and companies that do business with the department, according to disclosures obtained by POLITICO. Tom Krause, who is also the lead official for Treasury's DOGE team, reported hundreds of thousands of dollars' worth of shares in a wide range of financial companies, including those that provide services to the unit Krause oversees. He and two other Treasury DOGE team members — Todd Newnam and Linda Whitridge— also reported owning shares of Intuit, the parent company of TurboTax, which has lobbied heavily against IRS Direct File, a program targeted for elimination by Elon Musk and DOGE. Krause, who is also the CEO of Cloud Software Group, has been leading Treasury's DOGE team since January. In February, he also took on the duties of Treasury's fiscal assistant secretary after David Lebryk, a longtime career official, resigned amid a clash over DOGE's access to the payments systems. As the top official overseeing Treasury's Bureau of the Fiscal Service, Krause is at the helm of agency operations that include running the federal payments system and managing the cash and debt that finances the government. Among his financial holdings were hundreds of thousands of dollars' worth of shares of JPMorgan Chase, Bank of America, PNC and U.S. Bank. They are among the companies that provide financial services to the Bureau of the Fiscal Service as it disburses trillions of dollars of payments each year and seeks to collect debt owed to the government. He disclosed investments in other banks, such as Wells Fargo, Deutsche Bank, Morgan Stanley and Santander, which are among the financial institutions that purchase U.S. debt securities through Treasury auctions managed by the Fiscal Service. In addition, Krause, who is one of the officials leading Treasury's efforts to modernize its IT and financial infrastructure, disclosed owning shares of big government contractors like Accenture and large tech firms like Oracle, Google and Amazon. It's not clear whether he and the other DOGE team members have been required to divest from any of their financial holdings. After filing his initial financial paperwork in March, Krause disclosed in two additional filings a range of purchases and sales of assets, but none included any of his bank stock holdings. 'These Treasury and IRS employees are following all ethics laws and guidelines, including policies concerning recusals,' a Treasury spokesperson said in a statement. Krause did not immediately respond to a separate request for comment. Newnam and Whitridge also did not immediately respond to a request for comment. Several former Treasury officials and government ethics experts said the disclosures raise ethics concerns. 'It's a massive, glaring red flag of a conflict of interest here,' said Dylan Hedtler-Gaudette, the director of government at the Project on Government Oversight. 'A person at this level of [the] Treasury Department should absolutely not have direct financial ties to the industries and the companies that he or she is in part responsible for overseeing.' Don Hammond, who previously served as Treasury's fiscal assistant secretary, said there's a wide range of banks and financial companies that would be 'extremely problematic' for someone in that role to be invested in because they're service providers to Treasury. Other categories of potential conflicts include large IT contractors and the financial institutions that have an interest in how Treasury operates its sale of government debt, he said. Several large banks provide Treasury with lockbox services, payment collection services, and electronic processing services for taxes. 'JP Morgan Chase and Bank of America are huge, critical vendors to Treasury,' Hammond said. The fiscal assistant secretary 'plays a predominant role in determining the sourcing of services, the manner in which payments are conducted, and how processing is done,' he said. Julie Brinn Siegel, who was Treasury's deputy chief of staff during the Biden administration, sharply criticized the DOGE team members' investments in tax preparation software maker Intuit, which has been lobbying against the IRS Direct File program. 'The DOGE Team at Treasury killed free tax filing software, is outsourcing foundational technical infrastructure, and firing the cops who keep our financial system safe from catastrophe,' she said. 'They also have large holdings in the exact tax prep, government contracting and financial services companies that will profit from their actions. Who are they working for?' The Biden-era program, which the Trump administration kept for this year, allows taxpayers to pay their taxes for free directly to the IRS rather than use private sector tax preparation software. The Associated Press reported last month that the administration plans to end the Direct File initiative, months after Musk posted in February that his team had 'deleted' the government group working on it. The financial disclosures from Treasury's DOGE team also come amid a political and legal battle over DOGE's access to the Treasury payment system. Democrats have blasted the administration for allowing DOGE to access sensitive payment databases, and federal employee unions have accused Treasury of violating federal privacy laws. Treasury Secretary Scott Bessent has defended DOGE's work as a much-needed effort to overhaul antiquated technology systems and payment processing, even as he has sparred with Musk over leadership at the IRS. After several courts temporarily blocked DOGE's access to the payment system, the administration has won several efforts to remove those restrictions. A federal judge in New York is weighing a request by Treasury to dissolve the final remaining prohibition on DOGE employees getting access to the sensitive payment system.
Yahoo
13-05-2025
- Business
- Yahoo
Trump's 'big beautiful bill' would officially kill the IRS's free direct-tax filing tool
Republicans are officially planning to kill the IRS free direct tax-filing tool. Trump's "big beautiful bill" includes a provision to terminate the program. Republicans have described the tool as wasteful and an example of government overreach. If Republicans on Capitol Hill get their way, the IRS's free direct tax-filing tool is going away for good. A 389-page tax bill released by House Republicans on Tuesday includes a provision directing the Secretary of the Treasury to terminate IRS Direct File within 30 days of the bill's passage. It's not a huge surprise. The program already seemed to be in trouble, with a Treasury official telling BI in April that it was a failed and disappointing program. Republicans have argued that the tool, which was rolled out in 2024, is wasteful and an example of government overreach. Democrats, on the other hand, have contended that the program represents exactly the kind of government-efficiency project that DOGE should be interested in. The bill, a key element of what President Donald Trump and congressional Republicans have deemed the "One Big Beautiful Bill," is set to be marked up in the House Ways and Means Committee on Tuesday. The fiscal bill, the centerpiece of Trump's legislative agenda, could face tweaks as Republicans in both chambers hash out differences among themselves over the next several weeks. The White House and spokespeople for the Ways and Means Committee did not immediately respond to a request for comment. The bill also allocates $15 million to study the creation of a new public-private partnership to provide free tax filing for up to 70% of taxpayers. That program would replace both IRS Direct File and other free tax filing services. Read the original article on Business Insider
Business Insider
13-05-2025
- Business
- Business Insider
Trump's 'big beautiful bill' would officially kill the IRS's free direct-tax filing tool
If Republicans on Capitol Hill get their way, the IRS's free direct tax-filing tool is going away for good. A 389-page tax bill released by House Republicans on Tuesday includes a provision directing the Secretary of the Treasury to terminate IRS Direct File within 30 days of the bill's passage. It's not a huge surprise. The program already seemed to be in trouble, with a Treasury official telling BI in April that it was a failed and disappointing program. Republicans have argued that the tool, which was rolled out in 2024, is wasteful and an example of government overreach. Democrats, on the other hand, have contended that the program represents exactly the kind of government-efficiency project that DOGE should be interested in. The bill, a key element of what President Donald Trump and congressional Republicans have deemed the "One Big Beautiful Bill," is set to be marked up in the House Ways and Means Committee on Tuesday. The fiscal bill, the centerpiece of Trump's legislative agenda, could face tweaks as Republicans in both chambers hash out differences among themselves over the next several weeks. The White House and spokespeople for the Ways and Means Committee did not immediately respond to a request for comment. The bill also allocates $15 million to study the creation of a new public-private partnership to provide free tax filing for up to 70% of taxpayers. That program would replace both IRS Direct File and other free tax filing services.
