The Internal Revenue Service announced Thursday that its experimental Direct File free tax-filing option for simplified tax returns would become a permanent option starting next year.

In a release, the IRS, along with the U.S. Treasury Department, said its Direct File pilot program, which rolled out on a limited basis earlier this year, saw 140,000 taxpayers claim more than $90 million in refunds and save an estimated $5.6 million in filing costs.

“President Biden is committed to saving Americans time and money and ensuring families receive the tax benefits they’re owed. Providing a free tool to all Americans who want the option to file directly with the IRS is key to achieving those goals,” said U.S. Secretary of the Treasury Janet L. Yellen in a statement.

The Direct File option allows taxpayers to file their federal income tax returns directly with the IRS without the need for third-party software or services, which often charge fees. This initiative is part of the administration's broader effort to simplify the tax-filing process and reduce the financial burden on taxpayers.

Yellen emphasized the benefits of the Direct File system, noting that it not only saves money but also reduces the complexity and stress associated with tax filing. “By making the Direct File option permanent, we are taking a significant step towards modernizing our tax system and making it more accessible and equitable for all Americans,” she said.

The program's success during its pilot phase demonstrated its potential to streamline the filing process. Many participants reported a more straightforward and less time-consuming experience compared to traditional methods. The IRS highlighted that the program is particularly beneficial for individuals with uncomplicated tax situations, such as those with straightforward income sources and without numerous deductions or credits.

To enhance the program's reach and effectiveness, the IRS and Treasury Department are working on integrating the Direct File system with state tax filing processes. This integration aims to provide a seamless experience for taxpayers who need to file both federal and state returns. The Treasury Department has invited all 50 states to collaborate in offering this free filing option to their residents.

Douglas O'Donnell, IRS Commissioner, commented on the pilot's outcomes, saying, "The Direct File pilot program has proven that a simplified, no-cost filing option can be effective and well-received by taxpayers. We are excited to expand this service nationwide and continue to improve the tax-filing experience."

The move to make Direct File permanent has garnered support from various consumer advocacy groups, who have long called for a more taxpayer-friendly filing system. These groups argue that the current system, which relies heavily on third-party services, can be costly and confusing for many taxpayers.

In addition to the financial savings, the Direct File system is designed to be user-friendly, with step-by-step guidance to help taxpayers accurately complete their returns. The IRS has also committed to ongoing enhancements to the platform, including improvements in user interface, accessibility features, and support for more complex tax situations over time.

As the IRS prepares to roll out the permanent Direct File option next year, they are also planning an extensive public awareness campaign to ensure that taxpayers are informed about the availability of this new service. The campaign will include educational materials, online resources, and partnerships with community organizations to reach a broad audience.

The introduction of a permanent Direct File option marks a significant milestone in the efforts to modernize the U.S. tax system, aiming to make tax filing easier, more efficient, and less costly for millions of Americans. This initiative reflects the ongoing commitment to leveraging technology to enhance public services and reduce barriers for taxpayers across the country.

In addition to the permanent implementation of the Direct File system, the IRS and the Treasury Department are also exploring additional features to make the tax filing process even more efficient. These include enhanced security measures to protect taxpayer information, real-time assistance for users with questions, and expanded compatibility with various state tax systems to further simplify the filing process.

Moreover, the success of the pilot program has prompted discussions about potential future expansions of Direct File capabilities. This could include support for more complex tax situations, such as those involving multiple income sources, itemized deductions, and small business income. By continuously improving and expanding the Direct File system, the IRS aims to cater to a broader range of taxpayers and ensure that everyone has access to a free and straightforward way to file their taxes.

As part of the broader strategy, the IRS is also collaborating with technology experts and user experience designers to ensure that the Direct File platform remains intuitive and user-friendly. This collaboration aims to create a seamless digital experience that minimizes errors and maximizes user satisfaction.

The implementation of the Direct File system is expected to have a ripple effect across the tax preparation industry. By offering a free and efficient alternative, the IRS hopes to alleviate the financial burden on taxpayers who currently pay for third-party tax filing services. This shift could lead to increased competition and innovation within the industry, ultimately benefiting consumers.

In conclusion, the permanent establishment of the Direct File system represents a significant advancement in the modernization of the U.S. tax system. It reflects the government's commitment to leveraging technology to improve public services, reduce costs, and enhance the overall taxpayer experience. As the program continues to evolve, it promises to make tax filing simpler, more accessible, and more equitable for all Americans.

The Direct File system is expected to revolutionize how Americans approach tax season, providing a reliable and free resource for millions of taxpayers. The IRS's commitment to continuous improvement and adaptation will ensure that the system remains relevant and effective, meeting the diverse needs of the American populace. The successful implementation and expansion of Direct File could serve as a model for future government initiatives aimed at simplifying and modernizing essential services.