A Taxing Cut for IRS: Free Tax Filing Option to be Ended

At the conclusion of the recent filing season for 2024 tax returns, the Trump administration announced that the Internal Revenue Service (IRS) will end its free Direct File (DF) program that taxpayers have used on the IRS website to file their own tax returns. The decision was based on fact-finding by the Department of Government Efficiency (DOGE) that DF duplicated Free File (FF)—a public-private free offering that has been available since 2003.

Senator Elizabeth Warren denounced the decision ending DF, saying that Trump and Musk are “going after Direct File because it stops giant tax prep companies from ripping taxpayers off for services that should be free. Americans want a free and easy way to file their taxes—Trump and Musk want to take that away.”

E-File, Free File (FF), & Direct File (DF)

Taxpayers often confuse FF and DF—two separate IRS free on-line self-prep tax options. Both programs rely on the 1986 creation of IRS e-file (electronic-filing), which was originally available only to paid tax preparers like CPAs and firms like H&R Block and TurboTax.

Prior to e-file—in which completed tax returns go directly from tax preparers’ computers into the IRS computer system—the IRS had to convert paper returns into computer-readable form, an error-prone process. E-file has reduced this error rate and has expedited tax refunds. Today 100 million tax returns are e-filed; three out of every four individual returns are now filed electronically.

In 2003, IRS created Free File Alliance LLC, a public-private partnership, with several tax software firms—H&R Block, TurboTax and others—that provide free commercial tax preparation and e-filing services on the IRS’s own website. Over the years, Alliance membership has changed—H&R Block leaving in 2020 and TurboTax in 2021, and others joining. Taxpayers using IRS Free File can check the IRS website every year to determine which private tax firms are participating. In 2024, the Alliance included eight firms.

Each tax software firm sets its eligibility requirements for use of their software products, but the cumulative offers must allow 70 percent of US taxpayers to be eligible for at least one tax software product. For example, use of FF online tax filing in 2025 was limited to taxpayers with adjusted gross income no higher than $84,000.

Following the success of FF, the Inflation Reduction Act of 2022 awarded the IRS $80 billion in supplemental funding through 2031 to increase staffing and develop its own online tax software service in addition to those of the Free File Alliance. This new tax product debuted in 2023, and is available to residents of 25 states whose adjusted gross incomes are no higher than $200,000 and do not itemize deductions.

It is this Direct File program that the IRS will end after this most recent tax filing season, as Free File continues to be available to taxpayers.

Why the IRS is Dropping Direct File (DF)

Some in Congress and commercial tax firms contend that DF is a waste of taxpayer money because free filing programs already exist. The Department of Government Efficiency (DOGE) has targeted DF as a candidate for elimination, telling IRS staff assigned to the program in March to stop working on its development for the 2026 tax filing season.

The 2025 tax season saw many taxpayers begin the DF process but never finish it. The IRS reported that 423,450 taxpayers logged into DF, but only 140,803 submitted accepted returns. It is unclear if users gave up in frustration or by what other means they submitted their tax returns. The average American typically spends about $140 per year preparing returns, either paying commercial tax firms to do their returns or buying do-it-yourself commercial tax software to use on their own computers.

During its brief history, DF has lacked the acceptance level that FF experienced. Initial Biden administration endorsements were enthusiastic as plans developed to spend the $80 billion supplemental funding, but this quickly dissipated. As one commercial tax preparation spokesman said, “Direct File is and has been a solution in search of a problem, a drain on critical IRS resources and a waste of taxpayer dollars.”

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