Free File Showdown: Will You Switch Sides?

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Getting excited to file your taxes?

No?

Well, you’re not alone.

But a new method may help you save big on filing all those numbers with the government.

The Internal Revenue Service (IRS) is entering the ring with a brand new weapon: Direct File 123, a free online tax-filing platform aiming to challenge the reign of commercial giants like TurboTax.

But is this government gladiator a champion in the making, or just a silly electronic mistake-ridden form from the IRS?

Let’s examine who’s eligible (you?), what it can handle, and how much coin you could save.

The Skinny

Before you picture yourself basking in a tax-free paradise, know that Direct File is still in training. This pilot program kicks off in March, limited to government employees in 12 states with simple tax situations. Think W-2s, unemployment, Social Security - no fancy stock options or rental income here. Not even RMDs! (Required Minimum Distributions - I’m looking at you old people!)

The Cost?

Who can resist free? Direct File is completely free, unlike the pay-as-you-go plans of its commercial rivals (below). Plus, you get live chat support from IRS pros, a bonus you won't find anywhere else.

Simple or Swimming Through Mud? 

Let's talk about ease of use. While Direct File promises a step-by-step guide, navigating the tax jungle can be tricky. And even the simplest form from the IRS may not seem, …so easy. The limited pilot scope might mean glitches and hiccups, and the questions might feel like riddles. Even the IRS says it’s “starting small, to get it right.” Let’s hope so!

Feature Face-Off: 

Compared to TurboTax, Direct File's features are like a bare-bones fighter next to a decked-out Transformer. It handles common credits but forget about specific deductions or complex income scenarios. Uploading documents? Forget it. You're going to be doing manual data entry. Ehhhhh.

Plus, Direct File is primarily for FEDERAL taxes, not state. If you are eligible and use Direct File, you may still need to use a separate state filing tool to finalize your state taxes. As of this writing, that tool is still in the works.

Refund/Pay Timing?

Sure, Direct File gives you a breakdown of your calculations, but don't expect a lightning-fast refund. And be warned, even the IRS can't guarantee error-free returns. SMH.

Verdict

So, is Direct File worth a shot? If you're a government employee in the lucky 12 states with a straightforward tax situation and a taste for adventure, why not? It's free, after all. But if you have a complex return or crave the comfort of established services, you’ll have to stick with your trusted champion for now.

Plus, even the cheapest offerings from the likes of TurboTax or others offer so much convenience when it comes to looking at previous year’s returns, maximizing credits, or offering state returns with no extra fee.

You may not save that much using Direct File. Maybe $20? $40? But those savings may diminish on the credits/deductions that Direct File can’t calculate.

Direct File is evolving, and who knows, it may someday become the norm for millions of Americans. I’m sure TurboTax, TaxSlayer and TaxAct will have something to say about that.

Save On,

Chris