Nearly half a million Nevadans are eligible for a new service allowing them to directly file their taxes with the Internal Revenue Service (IRS) for free.

Nevada is one of 12 states included in the Direct File pilot program, a new tool that permits low- and middle-income filers with simple tax situations to file directly with the agency online. The program officially launched Tuesday, accepting returns at all hours after an initial pilot had time constraints. A Spanish-language version launches at 10 a.m.

The Department of the Treasury estimates that 480,000 Nevadans are eligible for Direct File. In the 2022 tax season, about 1.85 million Nevadans filed individual income and employment returns — meaning about a quarter of filers are eligible this tax season.

In a call with reporters on Monday, Treasury officials said the average American spends 13 hours and $270 to prepare and file their tax returns. Direct File is an attempt to streamline and cut the cost of that process.

“The IRS has been trying to do this for decades, and now they finally have the resources from Congress to produce a tool like Direct File that is similar to the tools that have existed in other countries for decades,” Deputy Treasury Secretary Wally Adeyemo said. 

Who is eligible?

To use the tool, filers must have a W-2, 1099-G, SSA-1099 or 1099-INT form. Income received from independent contractor and gig work, pensions, online marketplaces or awards cannot be reported with Direct File.

The tool is targeted at lower and middle-income filers, so there are income restrictions on the use of Direct File. Ineligible groups include:

• Individuals making more than $200,000 a year ($160,200 if a filer had multiple employers)
• Joint filers whose combined wages are more than $250,000, or for whom one spouse earns more than $200,000
• Individual filers who are married but filing separately, and earn more than $125,000

Finally, Direct File users must take the standard deduction, rather than itemizing their deductions, and only works for people claiming common tax credits — the child tax credit, the earned income tax credit or the credit for other dependents, as opposed to more obscure credits. 

Direct File is not available to people who have health insurance through an insurance marketplace or who withdrew money from a health savings account. Filers with health insurance through their workplace, Medicare, Medicaid, the Department of Veterans Affairs, private insurance or who lack health insurance are eligible.

Eligible Nevadans can create an online account with the IRS in order to use Direct File. It works on both a smartphone and a tablet or computer.

In the test period beginning in early February, Adeyemo said 15,000 filers have used the tool thus far — and the Treasury has set 100,000 users as a goal for its first year.

How did the program come about?

The new program is part of an effort by the Biden administration and congressional Democrats to bolster the IRS through new appropriations in the Inflation Reduction Act, after years of declining funding for the agency and massive lobbying campaigns against free filing by tax preparation companies such as Intuit and H&R Block.

The Direct File program was established and funded through the federal Inflation Reduction Act, which established goals to ease the filing experience for the average taxpayer and strengthen tax enforcement against wealthier Americans in order to close the $600 billion gap between taxes owed and collected, according to the IRS. 

This $80 billion in extra IRS funding over 10 years has found itself in political crosshairs since its passage, with congressional Republicans repeatedly attempting to claw it back — already, $20 billion has been rescinded in a bipartisan budget agreement.

All five of Nevada’s congressional Democrats voted for the Inflation Reduction Act; Rep. Mark Amodei (R-NV), the state’s lone congressional Republican, voted against it.

The agency wants to expand the Direct File program next filing season to more states and a broader array of taxpayers. But doing so might require greater funding from Congress — an unlikely outcome so long as Republicans control a chamber.