New Jersey Taxpayers: Find Out If You Can Use IRS Direct File for Your Tax Returns

Race Day Live (New Jersey) – New Jersey citizens have access to a new, easier way to file their federal tax returns. IRS Direct File is a program designed to streamline the tax filing process, save costs, and increase efficiency.

What is the IRS Direct File?

IRS Direct File was first tested in 12 states during the 2023 tax season and has now been expanded to include New Jersey for the following tax filing season, which begins on January 27, 2024. More than 1.3 million New Jersey taxpayers are eligible for this program.

Governor Phil Murphy, who announced the state’s participation in July, touted Direct File as a more convenient and cost-effective alternative to traditional tax filing services.

Eligibility criteria

Taxpayers can check their eligibility by going to directfile.irs.gov/state and selecting New Jersey. Here are some important details about who can use this tool:

General requirements:

• You must have lived in New Jersey for the entire year.
• All your income must have been earned within New Jersey in 2024.
• You must use the same filing status (e.g., Single, Married Filing Jointly) for both federal and state returns.
• You must take the standard deduction, which is used by about 90% of taxpayers. Direct File does not support itemized deductions.

Income Rules

Direct File accepts several typical kinds of revenue, including:

• Wages and salaries (reported on Form W-2).
• Unemployment compensation (Form 1099-G).
• Social Security benefits (Form SSA-1099).
• Interest income (Form 1099-INT).
• Distributions from Health Savings Accounts for qualified medical expenses (Form 1099-SA).

However, certain income levels are excluded. For example, Direct File cannot be used if you had:

• Unreported cash income, such as tips or alimony.
• Income from gig work or other sources that require additional tax forms.

Income thresholds also apply:

• Individual wages must not exceed $200,000 (or $168,600 if you had multiple employers).
• Couples filing jointly must have combined wages of $250,000 or less.

Savings and Retirement Accounts

If you have a savings or retirement account, the following rules apply:

Eligible Accounts:

• Savings accounts, checking accounts, and Treasury obligations with earned interest.
• Health Savings Accounts (HSAs) used exclusively for medical expenses with no contribution limit changes.
• Flexible Spending Accounts (FSAs).

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Ineligible Accounts:

• HSAs where contribution limits changed due to marital or insurance status.
• Medical Savings Accounts (MSAs).
• Contributions or distributions from Individual Retirement Accounts (IRAs) (except for direct rollovers).

A substantial change is expected in March 2025, when Direct File will support retirement disbursements (Form 1099-R) from the majority of common retirement plans.

Tax Credits Supported Direct File allows you to claim many tax credits, including:

• Child Tax Credit.
• Earned Income Tax Credit (EITC).
• Saver’s Credit for retirement contributions.
• Premium Tax Credit for health insurance.
• Credit for the Elderly or Disabled.

However, it does not support credits associated with:

• Higher education expenses, such as college tuition or student loans.
• Energy-efficient home improvements.
• Adoption expenses.

Conclusion

To guarantee that you are ready when IRS Direct File becomes available, sign up for email notifications on the IRS website.

IRS Direct File will help many New Jersey citizens by providing an easy and affordable way to file taxes. If you satisfy the eligibility requirements, this program could be the simplest method to file your taxes this year.

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