Question: In the wake of the historic Hawaii state tax relief signed by Gov. Green, will Hawaii participate in the IRS Direct File program, which will enable Hawaii taxpayers to file their income taxes for free online using the Internal Revenue Service’s fairly new Direct File system? It would be a great help providing more tax-related savings for Hawaii’s people! The IRS is urging Hawaii to opt in!
Answer: “Hawaii, like many states, is evaluating the feasibility of participating in the IRS Direct File program. The state Department of Taxation is studying the current and future IRS Direct File requirements to determine eligibility criteria and the work required to properly integrate the Direct File program with Hawaii’s unique tax code and software system,” DOTAX spokesperson Gary Yamashiroya said in an email.
The IRS announced in May that Direct File would be a permanent option for free online filing of federal income tax returns starting in the 2025 tax season, after a successful pilot program this year involving 140,803 taxpayers from 12 states who had relatively simple returns. The pilot program did not prepare state returns, and most states involved in the pilot program don’t have a state income tax. However, four states in the pilot that do have a state income tax partnered with Direct File to guide taxpayers to their respective state portal after the taxpayer had submitted their federal return, so taxpayers could also prepare and submit their state return without a fee, according to the IRS website. Hawaii has a no-fee online portal for filing state income taxes, via tax.hawaii.gov.
In announcing that Direct File would become permanent, the IRS said it “is exploring ways to expand Direct File to make more taxpayers eligible in the 2025 filing season and beyond by examining options to broaden Direct File’s availability across the nation, including covering more tax situations and inviting all states to partner with Direct File next year.”
Details on the 2025 expansion are due in the coming months, but the IRS has already said there will be no limit on the number of states allowed to participate.
Direct File, which was built in-house by the IRS, guides the user through the preparation of their tax return, much like commercial software. It works on a smartphone, tablet or computer; there is no software to buy or install.
The analysis of the pilot program found that taxpayers overwhelmingly liked Direct File because it was trustworthy, easy to use and free. The IRS estimates that taxpayers in the pilot program saved a total of about $5.6 million in tax preparation fees.
The IRS says Direct File is not meant to replace tax professionals, commercial tax-preparation software or Free File Inc. “As a permanent filing option, Direct File will continue to be one option among many from which taxpayers can choose,” it said.
As for Hawaii income taxes, the bill that Gov. Green signed into law as Act 46 increases standard deduction amounts and amends tax brackets by increasing income limits within brackets.
Mahalo
My car broke down in the left lane on Kapiolani Boulevard. Traffic was creeping because of construction. People were just pulling around me, when a nice lady got out of her truck and asked me if I needed help. I told her my car wouldn’t start and that I needed a push to the side of the road. She quickly summoned the construction crew to push my car to the side. Randy and his crew from Hawaii Pacific Concrete and Paving not only pushed me to the side, but as the traffic cleared, found a driveway where I could sit and wait for the tow truck. Mahalo to all who helped! — Bev C.
Write to Kokua Line at Honolulu Star-Advertiser, 500 Ala Moana Blvd., Suite 7-500, Honolulu, HI 96813; call 808-529-4773; or email kokualine@staradvertiser.com.
