Lawmakers and the IRS have long grappled with how to offer free, online tax filing—and what the role of tax preparation software companies should be.
Giving some Americans the option to file for free generally has been a bipartisan goal, but it’s more complicated in practice.
The IRS created an agency-run free filing tool called Direct File during the Biden administration, which was widely cheered by Democrats. But Republican lawmakers in their new tax law are seeking to undo that tool, instead preferring a role for tax prep software companies that historically have been large donors.
Here’s where free tax filing stands now.
1. What did the GOP tax law do?
The tax law President Donald Trump signed in July provided $15 million for the Treasury Department to create a task force to issue a report to Congress by Oct. 2 on the cost and feasibility of establishing public-private partnerships to replace existing IRS free filing options.
The report is to study options for providing free tax filing for up to 70% of all taxpayers calculated by adjusted gross income.
As part of the research for the report, the IRS created an anonymous online survey for taxpayers to give feedback. The survey was open for less than two weeks and expired Sept. 2. It asked—among similar questions—whether the taxpayer was more likely to choose an IRS-run program if they knew that the program was free to them but cost the government at least $10 to $20 per return to process.
A House version of the bill floated terminating Direct File 30 days after enactment, though that provision didn’t make it into the final version of the law.
Also Read: IRS Chief Says Direct File Is ‘Gone,’ Other Audit Tech Is Coming
2. What’s the latest on Direct File and Free File?
Direct File: In its second year, Direct File is still up and running, despite attempts to kill it by Republicans and the tax preparation software industry.
Critics call it costly, unnecessary, and question whether the IRS had the authority to create such a tool in the first place. The IRS under former President Joe Biden said it’s just another option for taxpayers to file for free, directly with the agency.
Treasury Secretary and acting IRS Commissioner Scott Bessent previously committed to keeping Direct File for 2025. Almost 300,000 taxpayers filed using Direct File through April 20, an 111% increase from its pilot and limited offering last year. Over 32.2 million taxpayers were eligible.
Direct File in its first two years was limited in size and scope, with a restricted number of states and financial situations required to be eligible to use.
Direct File backers say the tool didn’t have a chance to reach its potential due to the lack of promotion by the Trump administration and claims that the program had been ended when it hadn’t yet.
Free File: Since 2003, the IRS under former President George W. Bush has also offered the Free File program, which includes a group of tax preparation companies known as the Free File Alliance. Those companies offer free tax filing software to eligible taxpayers. Eight companies participated in the Free File program this year, and the partnership in 2024 was extended for another five years.
This free-filing partnership option also has been criticized for its low uptake, though in the 2024 filing season it saw a roughly 11% uptick with more than 2 million returns filed. The Free File Alliance cited poor advertising by the IRS as a contributor to its low uptake.
3. What is the history of a public-private partnership?
The IRS has long seen itself as the tax prep industry’s ally, working together during the filing season and defending Free File when Democrats slammed the industry.
Free File started with 17 companies, including industry giants
The IRS subsequently reined in Free File on fears of vendors going out of business. Companies would only offer free filing to taxpayers under a capped dollar amount.
In the last 10 years, Intuit and H&R Block dropped out of taking part in Free File following an investigation from the media outlet ProPublica that they steered potential users toward commercial products that cost money to use and hid their Free File pages from search engines.
Read More:
IRS Seeks Feedback on Tax Filing Options for Report to Congress
IRS Extends Free File Partnership Program Another Five Years
IRS’s Long-Lived Free File Gets Boost From New Pilot’s Messaging
Despite DOGE and Detractors, IRS Direct File Must Keep Growing: Insight
Scrapping Direct File Will Let the IRS Focus on Bigger Priorities: Insight
Pre-Filled IRS Forms Would Help Taxpayers as Much as Direct File: Insight
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