IRS Direct File Likely to Be Shut Down After This Year

The Trump administration is reportedly planning to pull the plug on IRS Direct File, the free online service that allows many taxpayers to file their tax returns directly with the agency.

The Associated Press reported on Wednesday that the Trump administration is planning to pull the plug on IRS Direct File, the free online service that allows many taxpayers to file their tax returns directly with the agency.

The writing has been on the wall since the administration began implementing a widespread effort to cut wasteful spending and downsize the federal government.

In February, Elon Musk, the billionaire head of the Department of Government Efficiency, said on his social media site X that 18F—the federal agency that works on improving government technology and had assisted in building and testing Direct File—”has been deleted.” Shortly thereafter, dismissal notices went out to about 85 employees of 18F, effectively shutting down the office.

The Associated Press noted that there was some hope that Musk and his team of computer programmers would take over Direct File and improve it. But that won’t be the case, according to sources who spoke to the news outlet:

But the two people familiar with the decision to end Direct File said its future became clear when the IRS staff assigned to the program were told in mid-March to stop working on its development for the 2026 tax filing season.

Last year, the IRS’s free tax filing software was made available through a pilot program to those with relatively simple tax situations in Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, Texas, Tennessee, South Dakota, Washington, and Wyoming.

Across all 12 states in the pilot, 19 million taxpayers were eligible to use Direct File and 140,803 used it to file returns.

This year, in addition to the 12 states from last year’s pilot program, all of which are participating again, Direct File was expanded to include Alaska, Connecticut, Idaho, Illinois, Kansas, Maine, Maryland, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania, and Wisconsin.

The IRS said last May that the Direct File program would be made permanent.

The agency stated that it spent a total of $24.6 million, which included its report to Congress—in which the IRS studied the interest in and the feasibility of creating a direct e-filing tool for taxpayers—that was mandated by the Inflation Reduction Act of 2022. The IRS also said the total operational cost for Direct File was $2.4 million, including customer service, cloud computing, and user authentication.

However, an audit conducted by the Treasury Inspector General for Tax Administration on Direct File implementation, the results of which were released last month, found that the IRS underreported roughly $8.8 million. The agency failed to include costs incurred by the Office of Management and Budget for employees detailed to the IRS to help develop and pilot Direct File and costs incurred to create or leverage existing accounts through the IRS’s Credential Service Provider. The IRS also didn’t include all the costs of IRS employees from other functions who collaborated to support Direct File, TIGTA said.

As expected, Direct File was met with resistance from tax preparation software providers like H&R Block and Intuit, maker of TurboTax—companies that have made billions of dollars charging people to use their tax filing products. Intuit has called Direct File “a thinly veiled scheme,” a “half-baked solution” that is a waste of taxpayer money, and “a solution in search of a problem.”

According to a new study from the National Taxpayers Union Foundation, individual taxpayers spent an average of 13 hours and $290 filing their 2024 taxes this year.

Some lawmakers have also criticized the IRS for taking on the dual roles of both tax collector and tax preparer, arguing that Direct File could create a power imbalance between taxpayers and the government.