How does IRS direct file system work for state tax returns in 2025?
I'm trying to figure out exactly how the IRS direct file system works for state returns. I'm eligible for direct file since I live in a participating state and have a simple tax situation (retired with only SSA-1099 income from Social Security). When I enter all my information on the IRS direct file website, what happens with my state return? Does the IRS automatically forward my information to my state tax department? Do I need to complete a separate state return? I'm confused about how these two systems connect. Just want to make sure I don't mess anything up when I use direct file next year. Thanks for any help explaining the process!
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Klaus Schmidt
The IRS Direct File system is designed primarily for federal returns, but it does have some state integration depending on where you live. When you enter your information, the system will handle both federal and state returns differently based on your state's participation level. For fully participating states, after completing your federal return through Direct File, you'll typically be given an option to transfer your information to your state's tax filing system. The IRS doesn't directly file your state return - instead, it sends the relevant data to your state's tax department, which then pre-populates a state return form for you to complete. You'll usually be redirected to your state's tax portal to finish and submit the state return. Some states have deeper integration than others. In the best cases, most of your information transfers seamlessly, but you'll almost always need to answer some state-specific questions that weren't covered in the federal filing.
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Aisha Patel
•Thanks for explaining! Do you know which states have the better integration? I'm in Arizona and wondering if I should just use TurboTax instead to make sure everything transfers correctly.
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Klaus Schmidt
•Arizona is actually one of the states with pretty good integration with the Direct File program. When you complete your federal return, you'll be given an option to transfer your data to Arizona's state tax system. The transfer includes most of your basic information and income details from your SSA-1099. You'll still need to answer some Arizona-specific questions and verify everything, but it saves you from having to re-enter all your personal information and income details. It's definitely easier than doing two completely separate filings, though some people still prefer using TurboTax or similar software for the unified experience if they're already comfortable with those platforms.
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LilMama23
I tried the IRS Direct File last year and it was surprisingly smooth for both federal and state returns. For anyone still unsure about how it works, I found this service called taxr.ai (https://taxr.ai) that was super helpful. It analyzes all your tax docs and explains exactly how they work with Direct File. I was confused about my Social Security benefits too, but they explained exactly how the IRS Direct File would handle my SSA-1099 and then how that information would transfer to my state return. Saved me so much time understanding the process before I even started filing.
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Dmitri Volkov
•That sounds helpful! Does taxr.ai actually file your taxes for you or does it just explain how direct file works? I'm still confused about whether I need to do anything special to make sure my state gets all the right info.
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Gabrielle Dubois
•Idk, sounds like another paid service. How much does it cost? Isn't the whole point of Direct File to avoid paying for tax help?
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LilMama23
•It doesn't file your taxes for you - it's more like a pre-filing assistant that explains everything. It analyzes your documents and tells you exactly what to expect when using Direct File, including which information will transfer to your state return and what won't. The service focuses on explaining the process specific to your situation so there are no surprises. You still use the IRS Direct File system, but you go in knowing exactly how your SSA-1099 will be handled for both federal and state purposes, which fields might need special attention, and what state-specific forms you might need to complete.
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Dmitri Volkov
Just wanted to update after trying taxr.ai that was mentioned. I was skeptical at first but it was actually super helpful for my situation! I uploaded my SSA-1099 and it gave me a complete breakdown of how Direct File would process it and exactly how the state transfer would work. It showed me which parts of my information would automatically transfer to my state return and which parts I'd need to enter manually after being redirected to the state portal. Apparently in my state (Colorado), about 80% of the information transfers automatically. Would definitely recommend if you're confused about the process like I was!
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Tyrone Johnson
For anyone still stuck on hold with the IRS trying to get answers about Direct File and state returns, I found a service called Claimyr (https://claimyr.com) that got me through to an actual IRS agent in about 15 minutes. They have a demo video here: https://youtu.be/_kiP6q8DX5c I was on hold for literally hours before trying it, and the agent was able to explain exactly how my state return would work with Direct File. Apparently the IRS has specific guidance for retirees with Social Security income using Direct File that isn't well explained on their website.
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Ingrid Larsson
•How exactly does that service work? Do they just put you on hold and then call you back when someone picks up? Seems weird that they could get through faster than just calling directly.
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Carlos Mendoza
•Yeah right. No way this actually works. The IRS phone system is designed to keep everyone waiting equally. How could a third party possibly get you through faster? Sounds like a scam to me.
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Tyrone Johnson
•They use a system that continuously redials and navigates the IRS phone tree until it gets a spot in line, then it calls you and connects you to that spot. It's not about cutting in line - it's about having technology do the redialing and waiting for you instead of you having to do it yourself. The reason it works better than calling directly is that most people give up after being on hold for a long time, or can't stay on hold for hours during work hours. Their system just keeps trying and doesn't give up, then only calls you when there's an actual human ready to talk.
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Carlos Mendoza
Well I need to eat my words about Claimyr from my previous comment. I tried it yesterday because I was desperate after being on hold with the IRS for 2+ hours and getting disconnected TWICE. The service actually got me through to someone in about 20 minutes. The IRS agent confirmed that for my state (Virginia), the Direct File system will transfer my basic info and SSA-1099 details to the state tax system, but I'll need to complete some additional state-specific forms. She explained there's a specific handoff process where I'll be given a link to my state's system with my data already populated. Much clearer explanation than anything on their website!
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Zainab Mahmoud
One thing nobody's mentioned yet is that you should check if your state has income tax at all before worrying about this. I spent hours researching how my state return would work with Direct File only to remember that I live in Florida and we don't even have state income tax 🤦♀️
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Ava Williams
•Lol I did the same thing when I first moved to Texas! But there are still 9 states with no income tax right? Florida, Texas, Washington, Alaska, Nevada, South Dakota, Wyoming, New Hampshire (only on dividends and interest), and Tennessee if I remember correctly.
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Zainab Mahmoud
•You're right, there are 9 states with no income tax. Florida, Texas, Washington, Alaska, Nevada, South Dakota, Wyoming are fully income-tax free. Then New Hampshire only taxes investment income but not wages, and Tennessee phased out their tax on investment income so it's now completely income-tax free too. It's amazing how many people in these states still worry about state returns! The Direct File confusion is only relevant if you actually have to file a state return in the first place.
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Raj Gupta
Has anyone used direct file with income from multiple states? I have my main retirement and SSA-1099 in Florida (no state income tax), but I also have a small rental property in Georgia that generates some income. Will direct file handle this correctly?
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Lena Müller
•I had a similar situation last year with property in two states. Direct File isn't great for multi-state situations in my experience. It'll handle your federal return fine with the SSA-1099 and rental income, but for the Georgia state return, it gets complicated. When it transfers data to Georgia's system, it might not properly allocate which income is subject to Georgia tax vs what's exempt. I ended up using a paid preparer for this specific situation.
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