The tax man cometh: Looking at the IRS’ decision to ditch its Direct File system
Beginning next year, Americans will no longer be able to use Direct File, a short-lived free tax filing service provided by the U.S. Internal Revenue Service (IRS). First instituted by former President Joe Biden in 2024, the official IRS website for Direct File now states that the service is closed and “More information will be available at a later date.”
According to multiple reports, IRS official Cynthia Noe sent an email to state comptrollers on Monday, explaining that “IRS Direct File will not be available in Filing Season 2026.” Noe added, “No launch date has been set for the future.” Roughly half of U.S. states were participating in the program.
“The Direct File program was a possible first step in changing the way most taxpayers interact with the IRS,” Eric Zolt, a professor of taxation at UCLA School of Law, told Straight Arrow News. “Many other developed countries provide taxpayers with pre-populated tax returns that makes filing tax returns much less burdensome.”
What is Direct File?
The program was first launched under the Biden administration in 2024 and made available for the 2023 filing year. At the time, 12 states were brought on for the program’s pilot phase. Roughly 140,000 Americans used the system to file their taxes that year.
Direct File was subsequently made permanent, at which point another dozen states signed on, making free tax filing available to their residents. A Freedom of Information Act request filed by The Center for Taxpayer Rights showed that the number of Americans who used the service between 2024 and 2025 had more than doubled to 296,531.
“It is a program that made it easier for low- and middle-income taxpayers to file their tax returns,” Zolt said. “It had the potential to significantly reduce the error rate for taxpayers claiming the earned income tax credit.”
Following news of its dismantling, Sen. Ron Wyden, D-Ore., an author of the bill and ranking member on the Senate Finance Committee, said he wrote the legislation that paved the way for Direct File “because the existing free options were insufficient and the big tax prep companies had been caught red-handed using deceptive practices to scam taxpayers into overpaying.”
Turning to the private sector
Since its inception, Direct File has faced resistance from congressional Republicans, who accused the system of costing taxpayers too much money. Speaking to reporters at the White House on Wednesday, Treasury Secretary Scott Bessent said the administration thinks the private sector is more well-suited to handling Americans’ taxes, and that the program “wasn’t used very much.”
Bessent also pointed to “better alternatives,” including existing free private-public tax-filing services, as well as the various corporations that charge for tax preparation. However, critics say those free services are too complex and cumbersome, while private corporations are too costly.
According to one analysis, private tax preparation providers earned $14.5 billion in revenue in 2025. Similarly, in 2023, Open Secrets reported that tax prep companies spent $90 million lobbying U.S. lawmakers when the idea of a free filing system was first introduced.
“It is hard to discern a good faith rationale for this decision,” Daniel Shaviro, the Wayne Perry Professor of Taxation at NYU Law, told SAN. “Direct File has some problems, but they call for improving it, not scrapping it.”
Shaviro said that while Direct File “could be made much more flexible and user-friendly,” it provided an accessible option for those who find private accountants and companies too costly. Additionally, young and low-income Americans with simple returns will be most affected by the dismantling of Direct File.
Is a new free filing service on the horizon?
In a statement released Thursday, Senate Ways and Means Committee Chairman Jason Smith, R-Mo., claimed that the program cost the U.S. public $41 million for the 2024 tax year, or roughly $138 per return.
“American workers and families deserve a tax filing system that meets their needs and will help them see the benefits of the working families tax cuts Congress passed earlier this year, including no tax on tips, no tax on overtime, and no tax on Social Security,” Smith said. “Fortunately, Treasury is finally shifting resources towards solutions that work, including IRS-affiliated free tax preparation programs, as well as the public-private partnership for free tax filing and improving technology at the agency.”
As for the Americans who used Direct File, approval was high. A report released by the Government Accountability Office in December said that 90% of users were satisfied with their experience. Similarly, taxpayers in the 12 pilot states claimed more than $90 million in refunds in the program’s first year, while saving $5.6 million in tax preparation fees.
The post The tax man cometh: Looking at the IRS’ decision to ditch its Direct File system appeared first on Straight Arrow News.
Ella Rae Greene, Editor In Chief
