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Oregon is first state to join free filing option for federal taxes

The Oregon Department of Revenue will offer the free federal tax-filing software, Direct File, to taxpayers next year, becoming the first state to join the system.
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Courtesy of the Oregon Department of Revenue
The Oregon Department of Revenue will offer the free federal tax-filing software, Direct File, to taxpayers next year, becoming the first state to join the system.

The state and federal free tax-filing software programs will be linked to make tax filing less of a painful experience.

When Oregonians file their federal taxes next year, they’ll have a new free option.

According to a release from the U.S. Department of the Treasury and Internal Revenue Service, Oregon is the first state to join the IRS Direct File software program, which allows people to file their taxes for free. The program was pilot tested in 12 states – Arizona, California, Florida, Massachusetts, New Hampshire, New York, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming.

The pilot demonstrated the potential for filers to save millions as the program expands. According to the U.S. Treasury Department, about 140,000 taxpayers tested it to file their federal taxes, receiving around $90 million in refunds. The department said they saved $5.6 million in filing fees.

Paying accountants or buying tax-filing software can be expensive – surveys show the average American spends $270 to file their taxes – and companies in the industry have spent millions of dollars lobbying to prevent the IRS from offering free tax preparation services, ProPublica has reported. They forged an agreement with the IRS to offer free software for lower-income earners, but the news organization found they’ve tucked the software into the depths of their websites, making it difficult to find.

There are several other free options, but they’re mostly for lower-income or older taxpayers. One, FreeFile Oregon, has been available for several years for state taxes, and it doesn’t have an income limit. And this year, for the first time, the state offered its own version of Direct File for state taxes through its website. Less than 7,000 taxpayers used it to file their Oregon returns, according to Robin Maxey, a spokesman for the Oregon Department of Revenue.

He said the state expects to receive more than 2 million total returns this year.

The federal Direct File program had a few exceptions during the pilot phase, with taxpayers asked screening questions to make sure they qualified, but Maxey said that based on information from the IRS he expects the program to expand to include more taxpayers.

“The Oregon Department of Revenue is excited that the IRS is making its Direct File program permanent beginning next year,” Maxey said in an email.

Next year, the state and federal Direct File programs will be linked on the Oregon Department of Revenue’s website. Once a taxpayer completes their federal return using the software, they’ll be directed to the state system to complete their state return. Both systems are mobile friendly and considered easy to use, based on a survey of 11,000 taxpayers who used the federal system. About 90% ranked it as “excellent” or “above average, the release said.

“Together, they will give Oregon taxpayers a seamless way to file their federal and state income taxes for free,” Maxey said.

U.S. Sen. Ron Wyden, an Oregon Democrat, called the news that Oregon will offer Direct File for federal taxes a “happy day for Oregonian taxpayers who are tired of getting ripped off by the big tax software companies year after year.”

“Direct File is long overdue, and it’s the kind of public service the federal government ought to be providing to Americans wherever it can,” Wyden said.

The Oregon Capital Chronicle is a professional, nonprofit news organization. We are an affiliate of States Newsroom, a national 501(c)(3) nonprofit supported by grants and a coalition of donors and readers. The Capital Chronicle retains full editorial independence, meaning decisions about news and coverage are made by Oregonians for Oregonians.

Lynne Terry has more than 30 years of journalism experience. She reported on health and food safety in her 18 years at The Oregonian, was a senior producer at Oregon Public Broadcasting and Paris correspondent for National Public Radio for nine years.