Taxpayers in Maryland will have another option for filing their taxes in 2025. Code for America and Maryland have announced a partnership that will enable Maryland residents to file their federal and state tax returns online—and for free.
Maryland is the ninth new state to announce plans to allow its residents to file taxes through IRS Direct File. The state joins Connecticut, Maine, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania, and Wisconsin, which have signed on to the next filing season. That’s in addition to the 12 states from the pilot program (Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming).
The partnership will make FileYourStateTaxes, a civic tech nonprofit organization’s integrated state tax filing tool, available to Direct File taxpayers in Maryland. The result is that Direct File users in the state can also file state returns for free.
“Partnering with the IRS to offer Direct File to eligible Maryland taxpayers in the 2025 tax season is an exciting opportunity and fundamental to our core priority of modernizing our agency to make government work better for all Marylanders,” said Comptroller Brooke E. Lierman.
“In countries across the globe, residents enjoy much simpler return-free tax systems. While our state and nation are not there yet, with Direct File and our agency’s new Maryland Tax Connect system for individuals coming this term, Maryland will have the most transparent, efficient, and modern system in the nation.”
In addition to signing on to Direct File, Maryland becomes the second new state partnered with Code for America to make free online filing available for the next filing season (the other was North Carolina). Code for America previously partnered with two states—Arizona and New York—during the 2024 tax filing season.
Direct File Pilot
As part of a pilot program in 2024, eligible taxpayers in 12 states could file their federal tax returns for free directly with the IRS using Direct File.
The pilot was announced in October 2023 and closed after the filing season ended in April 2024. The IRS has called it a success, saying that several hundred thousand taxpayers across 12 states signed up for Direct File accounts, and 140,803 taxpayers filed their federal tax returns using the new service. Eligibility was limited to taxpayers with simple returns in those states.
The IRS began promoting the program in January of 2024, with a more robust push to taxpayers when the program fully opened in March. The March rollout of the pilot program included making the service available in Spanish.
State Tools
During the pilot, four states built companion state tax filing tools that allowed Direct File users to file their state returns seamlessly. In a survey of taxpayers in the two states partnered with Code for America—Arizona and New York—96% were “satisfied” or “very satisfied” with the program.
The key to the program is federal-to-state data transfer. Specifically, Direct File taxpayers could transfer their federal return information to a state product without having to start from scratch.
“The IRS has this information,” says Gabriel Zucker, Program Director for Tax and Partnerships at Code for America, and “it’s your data.”
And while federal and state tax systems are separate, much of the data required to prepare your federal income taxes is also needed to prepare your state forms. Taxpayers are used to filing federal and state tax returns together, and don’t want to re-answer questions or re-enter data.
The solution? Data portability. The result, explains Zucker, was to build a state product that tied together two independent products but that reads as one experience for the taxpayer. The data from the federal system could be used to populate the state returns, usually requiring only a couple of additional questions. (Remember, at this stage, these are simple returns.)
If that doesn’t sound ground-breaking, it’s not—at least not in the private sector. It’s reminiscent of the experience you might have when using other tax preparation software. So, why not create the same experience—for free—through federal and state programs?
The result so far has been positive. A significant majority of those who used the program—95%—found the transfer to be “seamless and quick.” From the time of the data transfer, 88% of filers completed and submitted their state return within 15 minutes.
That’s pretty remarkable considering that these programs were just ideas not so long ago. Zucker marvels that there have been “light years of progress in a few short years.”
That doesn’t mean that every state can or will make the switch. So far, the state programs will only be available in states either with no income tax or where a solution has been built.
It also doesn’t mean state taxpayers must lean on a Code for America platform. Zucker notes that other companies are also working to build solutions, and some states have made a version of the platform available to taxpayers on their own.
Concerns
While taxpayers appear satisfied, that doesn’t mean that they haven’t raised concerns. Those worries are largely the same as those associated with the federal version of Direct File—like getting assistance.
As part of the pilot, the IRS dedicated staff to Direct File help options like Live Chat. Zucker says the same thing is happening on the state side. However, he noted that there are not typically a lot of questions on the state side (again since the additional work required on these versions of state returns is typically not significant).
As for concerns about errors? Zucker notes that no system is foolproof. When taxpayers were entering data by hand, there was potential for error. “You could make a mistake then,” he says, and “you can make a mistake now.” However, he notes that the more you rely on one-stop shopping for data entry, the better (meaning, for example, it’s less likely that you’ll see number mistakes, like transposed numbers on a state return if the correct information is transferred over from the federal system).
With respect to security, Zucker emphasizes that the programs use industry-standard best practices. And, he says, since information is not provided to advertisers (no private third parties have access to your data), your data is more protected than it may be on commercial sites.
Zucker says that the Direct File program and the state programs “put taxpayers first.”
Inflation Reduction Act
Direct File is driven by the Inflation Reduction Act (IRA), through which Congress tasked the IRS with delivering a report on the cost of developing and running a free direct e-file tax return system. The IRS released the report to Congress in May 2023.
According to the 2023 report, the IRS studied how an IRS-run free direct e-file tax return system might work. Most taxpayers surveyed by the agency reported interest in using an IRS-provided tool to prepare and file their taxes.
When the filing season opened in January 2024, the IRS announced the limited-scope pilot, which it claimed would allow the IRS to evaluate the costs, benefits, and operational challenges associated with providing the option to taxpayers. The pilot was, the IRS says, a success. According to the IRS, Direct File users reported a high degree of satisfaction and quick answers to their filing questions. In a GSA Touchpoints survey of more than 11,000 Direct File users, 90% of respondents ranked their experience with Direct File as “Excellent” or “Above Average.” Most survey respondents who filed taxes in the prior year reported having to pay to prepare their taxes last year. Among survey respondents, 47% of users paid to file their taxes last year, and 16% did not file last year at all.
When asked what they particularly liked, respondents most commonly cited Direct File’s ease of use, trustworthiness, and that it was free. Additionally, 86% of respondents said their experience with Direct File increased their trust in the IRS.
(You can read what some taxpayers had to say to Forbes about their experiences here.)
In May of 2024, U.S. Secretary of the Treasury Janet L. Yellen and IRS Commissioner Danny Werfel announced that the program would be permanent and available to all 50 states and the District of Columbia for the 2025 filing season. However, not all taxpayers will benefit immediately. Yellen acknowledged the challenges in rolling the program out to all taxpayers, saying, “Over the next few years, we will expand Direct File so that it supports all of the most common tax situations.”
Zucker hopes that the same energy will continue. In a few years, he hopes to see the program in all states.
Code For America
Code for America is a civic tech nonprofit that works with community leaders and governments to build equitable, accessible digital tools and services. Founded in 2009, Code for America believes that government can work for and by the people in the new digital age.
In 2021 and 2022, Code for America helped build GetCTC.org, which made it easier for families to claim the expanded child tax credit (CTC). Over the course of 2021 and 2022, nearly 200,000 households claimed an estimated $685 million using GetCTC.
Currently, Code for America works with GetYourRefund.org, a nonprofit service offered in partnership with Volunteer Income Tax Assistance (VITA) organizations across the country. To date, GetYourRefund has helped 154,000 people successfully file their taxes.
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