New Jersey turns to Direct File to make tax filing easier for older adults
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The Garden State is one of several that are now making retirees eligible for the federal Direct File program.
In New Jersey, the population of adults aged 60 years and older is projected to increase by 32% by 2030. A growing older adult population also means the number of retirees residing in the state is set to increase. As more people start living on fixed incomes, the state is looking to make tax returns simpler and less expensive for aging residents.
New Jersey is one of 25 states this year participating in the federal Internal Revenue Service’s Direct File program, which offers residents a free federal tax return filing service. The IRS launched the service last tax season as a pilot program, and lawmakers moved to make it permanent. Its long-term implementation remains uncertain, however, as funding as some GOP leaders continue to call on President Donald Trump to end the service.
The Garden State joined the federal program this tax season and also offers a state-level Direct File service for residents to file state tax returns, which was developed by the state’s Department of Treasury and Office of Innovation in partnership with the nonprofit organization Code for America.
Under the expanded service, individuals with retirement incomes, such as 401(k), pension, annuity and other payments, are now eligible to use the program, state officials announced earlier this month. Officials estimate an additional 400,000 residents will now be able to leverage the online tax filing tool.
The free Direct File program reduces the need for people to use costly tax filing services, which can cost on average $160 for filers, according to the IRS. The program also automatically enrolls users in tax credits like the Earned Income Tax Credit and Child Tax Credit.
“An estimated $160 savings on tax filing expenses is significant for many New Jersey seniors who live on fixed incomes," said Dave Cole, chief innovation officer for New Jersey, in a statement. “Expanding eligibility for the Direct File program to include income from employer-sponsored pension and retirement accounts will help lower costs for retirees and other eligible New Jerseyans.”
The Office of Innovation worked with tax preparers in the state, including those who work with aging adults, to ensure the program’s rollout in January would be user-friendly, Cole said in an email to Route Fifty. For instance, officials included plain language in both English and Spanish and ensured that the online resources were compliant with federal and state accessibility standards.
Users can leverage the online service on mobile devices, tablets and computers, and can interact with a live chat support function to answer any questions as they file their taxes.
“The vast majority of New Jersey filers are completing the state portion of Direct File in less than 20 minutes, due in part to the ability of the tool to immediately use the data from the federal return,” Cole said in the email, noting that traditional tax filing processes could take several hours for some residents.
The Direct File tool can also help reduce errors in tax filings that are “sometimes inherent” with paper-based processes, saving residents and government officials the time and resources it takes to correct them, Cole said.
Preliminary data shows that New Jersey residents are having positive experiences with the Direct File service. A user survey, for instance, found that 96% of tax filers are satisfied or very satisfied with the tool’s process, and 95% of respondents said they prefer Direct File over previous methods they’ve used.
Several other states have also moved to expand who is eligible for Direct File. Arizona, New York and Maryland recently announced that retirees in those states can now start leveraging Direct File this tax season.