The upcoming tax season presents an opportunity for residents to explore more affordable and efficient ways to file their taxes. One such solution is Direct File, a free online tool that allows taxpayers to submit their returns directly to the IRS without incurring additional fees. This initiative has already garnered positive feedback from over 140,000 households across 12 states, with many rating it highly for its convenience and cost savings.
Expanding access to Direct File could significantly benefit Hawaii's residents. By adopting this system, the state could help taxpayers save both time and money. According to a study by the Economic Security Project, if just one-third of eligible Hawaii taxpayers utilized Direct File, they could collectively save $34.6 million in filing fees and nearly a million hours of filing time. Additionally, Direct File can assist residents in claiming important tax credits they might otherwise overlook. For instance, the Earned Income Tax Credit (EITC) offers rebates to low- and middle-income families, but a significant number of eligible individuals do not claim it. With Direct File, more residents could take advantage of these benefits, potentially receiving millions in unclaimed funds.
Enhanced access to tax credits through Direct File could provide crucial financial support to struggling families. Many residents are considering leaving Hawaii due to economic pressures, and improved access to credits could help them stay. The adoption of Direct File would also be a cost-effective move for the state, as it involves minimal startup costs and leverages existing software infrastructure. Assuming federal support continues, integrating Direct File into Hawaii’s tax system by 2026 would be a wise decision, offering substantial benefits to both taxpayers and the state.