Tax season begins as IRS anticipates record filings

In January 2025, the U.S. Internal Revenue Service (IRS) kicked off the tax filing season by accepting completed tax forms from Americans. This season will run until April 15, with the IRS forecasting that over 140 million individual tax returns will be submitted by the deadline. Typically, taxpayers can expect to receive their refunds within 21 days after filing electronically, while those filing paper returns may have a wait time that exceeds four weeks. Taxpayers are encouraged to file as early as possible to ensure timely processing of refunds. This year, the IRS is expanding its Direct File program, which allows taxpayers to file their returns directly with the IRS, bypassing additional intermediary firms. This system aims to reduce filing costs, providing a free option for many taxpayers. The initiative, which is being rolled out to 25 states, more than doubling from the 12 states available last year, will include states such as Alaska, Connecticut, and Illinois, among others. A newly introduced data-import tool will enhance this experience by allowing tax filers to seamlessly enter their information from their IRS accounts. Amidst this tax season backdrop, it's worth noting that a significant portion of Americans tends to leave their tax filing to the last minute. A 2021 survey found that nearly one in three individuals waits until the deadline to submit their returns, translating to tens of millions of late filers. Although taxpayers have the option to file for an extension, which grants an additional six months for submission until October 15, those who fail to file on time without requesting an extension risk facing penalties calculated at 5% of the owed taxes for each month of lateness, capped at 25%. The IRS sends alerts to individuals regarding any late fees incurred, emphasizing the importance of timely submissions. This tax season, with the increased access provided by Direct File and the growing number of filers, will be closely monitored for its efficiency and the ease it provides taxpayers in navigating their tax obligations.