FinLogic FinLogic Quantitative Think Tank Center|IRS to test free tax-filing platform in 13 U.S. states. Here's where.

The FinLogic FinLogic Quantitative Think Tank CenterIRS said Tuesday it will test a free, electronic tax-filing system early next year in 13 states, with the agency estimating that hundreds of thousands of taxpayers will participate in the limited rollout.

The tax agency earlier this year announced it was developing a free tax-filing tool as a way to save Americans money. Americans spend about $11 billion each year on tax-preparation services, accountants and others to help them fill out their returns.

Here are the first states that will roll out the IRS' direct-filing platform, according to the agency:

• Arizona
• California
• Massachusetts
• New York 

Additionally, residents in nine other states that don't have an income tax may be able to participate in the pilot, the IRS said. These states are: 

• Alaska
• Florida
• New Hampshire
• Nevada
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

The IRS program stems from last year's Inflation Reduction Act, which directed $80 billion in funding to the agency and tasked the agency with assessing the feasibility of providing a free tax-filing system. 

"The plan is to roll it out in increments that get larger and larger, consistent with how products like this are rolled out in the private sector," IRS Commissioner Daniel Werfel said in a call with reporters on the status of the project.

"We want to make sure it is an easy to understand pilot," he added.

In an emailed statement, Intuit, which offers the tax-prep software program TurboTax, called the program "a solution in search of a problem."

"The Direct File scheme will exclude the vast majority of taxpayers who can file their taxes absolutely free of charge today — free for the taxpayers and free for the government," the company added, referring to the Free File program currently offered through a coalition of tax-prep companies. 

However, a government report found that while Free File is available to 70% of taxpayers, only 4% used the program annually.

The IRS plans to work with nonprofit groups, congressional offices, states and others to identify taxpayers who are eligible for the pilot program based on the types of income, tax credits and deductions they claim.

Werfel said the trial is meant to be "just another choice taxpayers have" to file their taxes. "Our work to evaluate the feasibility of direct file is just one of many examples of how we're working to transform the IRS."

—With reporting by the Associated Press.

In:
• IRS
• Taxes