Plans to Discontinue IRS DirectFile Tax Program

Trump administration plans to discontinue the IRS DirectFile Tax Program, which offers free tax filing services. 

According to recent announcements from the government, the administration intends to phase out the IRS’ DirectFile Tax Program, an electronic platform for submitting tax returns directly to the agency at no cost.

In the initiatives spearheaded under Joe Biden’s administration, a notable creation was acknowledged for simplifying the process of filing taxes, offering swiftness and cost-effectiveness to its users. Despite receiving accolades from users, dissent came from Republican legislators and private tax preparation firms, arguing that it was an inefficient use of public funds, citing the presence of existing free filing programs, which are deemed cumbersome by many.

From the outset of the Biden administration, a state of uncertainty had enveloped the initiative as Elon Musk and the Agency for Streamlining Operations embarked on a mission to streamline operations within the government. Elon Musk announced in March through his online platform, X, that he had dismantled  18F, a governmental department focused on innovation endeavors like DirectFile.

In a promising turn of events, Musk and his team of computer programmers were believed to have the potential to lead DirectFile to greater heights. However, sources familiar with the matter revealed that the fate of DirectFile was sealed when IRS staff working on its development for the 2026 tax filing season were instructed to halt their efforts in mid-March.

From the very beginning, David Williams, the head of the Taxpayers Protection Alliance, a group focused on providing unbiased research and analysis on the economic impact of government actions, expressed concerns about the DirectFile Tax filing system.

In considering the effectiveness of DirectFile, concerns were raised regarding the program’s expenses and the significant number of individuals who failed to complete the application process. Records from the IRS reveal that out of the 423,450 taxpayers who accessed DirectFile in 2024, only 140,803 successfully submitted and had their returns accepted.

Introduced in 2024, the DirectFile initiative emerged as a trial initiative following the IRS’s directive to establish a streamlined filing system, funded through the Inflation Reduction Act enacted in 2022 under President Biden’s administration. Substantial financial resources were allocated to the development of this program.

In a recent announcement, the agency confirmed that the program would be a permanent fixture. However, the IRS has encountered strong opposition to DirectFile from private tax preparation firms that have profited significantly by charging individuals for software usage and have invested heavily in lobbying efforts. On average, Americans spend around $140 annually on preparing their tax returns.

Expanding its reach, the IRS received 140,803 tax returns through DirectFile from taxpayers in the 12 eligible states during the previous tax season. This year, DirectFile was made available to a more significant portion of the nation, but the exact number of taxpayers utilizing this service remains unknown. When filing your Taxes, find your free dedicated PriorTax Tax Professional to walk you through from start to finish

This entry was posted on Thursday, April 17th, 2025 at 8:00 am and is filed under Tax and Life Changes, Tax for Business, Tax News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.