{"id":38901,"date":"2026-01-17T11:53:23","date_gmt":"2026-01-17T16:53:23","guid":{"rendered":"https:\/\/postalemployeenetwork.com\/news\/?p=38901"},"modified":"2026-01-17T11:54:24","modified_gmt":"2026-01-17T16:54:24","slug":"fyi-irs-shutters-direct-file-citing-cost-and-low-uptake","status":"publish","type":"post","link":"https:\/\/postalemployeenetwork.com\/news\/2026\/01\/17\/fyi-irs-shutters-direct-file-citing-cost-and-low-uptake\/","title":{"rendered":"FYI: IRS Shutters Direct File, Citing Cost and Low Uptake"},"content":{"rendered":"

Treasury<\/span><\/span>\u00a0announced in a new report to Congress that the\u00a0IRS<\/span><\/span>\u2019s\u00a0Direct File<\/span><\/span> tool will be suspended in favor of improving Free File \u2014 the IRS\u2019s long-standing partnership with private tax software companies<\/strong><\/em><\/p>\n

1\/16\/26 – \u201cThe report announces that the IRS will suspend Direct File,\u201d Treasury said in the report<\/a>, which is dated October 2 but was released November 5. \u201cThe report recommends refocusing IRS efforts on strengthening existing free filing programs, particularly Free File, while engaging stakeholders to modernize and promote awareness of Free File.\u201d<\/p>\n

The IRS was tasked with drafting the report by the One Big Beautiful Bill Act (P.L. 119-21<\/a>) and with presenting it to Congress by October 2. It\u2019s unclear whether lawmakers were given the report by that date.<\/p>\n

Direct File, launched as a limited-scope pilot in 2024, allowed taxpayers with simple returns to file directly through the IRS. Expanded to address more tax situations in 2025, the tool received positive user reviews but drew fewer filers than the agency anticipated. The IRS said\u00a0that misinformation<\/a>\u00a0surrounding the fate of the tool contributed to hurting uptake.<\/p>\n

In the report, Treasury said a combination of \u201clow participation and relatively high costs and burdens on the federal government\u201d were the main factors behind the decision to shutter the tool. The department estimated that the program cost $41 million to operate for tax year 2024, or at least $138 per tax return.<\/p>\n

The report also recommended increasing outreach for Free File and convening a \u201cFree Filing Modernization Summit\u201d to \u201cimprove existing free filing options, explore new approaches, and expand the number of taxpayers filing for free.\u201d<\/p>\n

States Informed<\/h2>\n

The report came within days of the IRS telling\u00a0states participating in Direct File that the free filing tool won\u2019t be returning in 2026 or the foreseeable future.<\/p>\n

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\u201cIRS Direct File will not be available in Filing Season 2026. No launch date has been set for the future,\u201d IRS product manager Cindy Noe wrote in a November 3 email to state revenue departments that was viewed by\u00a0Tax Notes<\/em>.<\/p>\n

The email, sent to all 25 states participating in Direct File, was the first confirmation that the program is being shuttered by the Trump administration following former IRS Commissioner\u00a0Billy Long<\/span><\/span>\u2019s claim<\/a>\u00a0from August that the program was \u201cgone.\u201d<\/p>\n

Taxpayers who filed through Direct File will no longer be able to access their returns through the program\u2019s webpage but can obtain a return transcript via their online account or by mail, according to the IRS email. The Direct File webpage was inactive as of press time.<\/p>\n

A total of 296,531 individuals successfully filed 2024 tax returns through Direct File this year.<\/p>\n

Treasury Secretary\u00a0Scott Bessent<\/span><\/span>, who is also acting commissioner of the IRS, was asked during a November 5 press briefing about the rationale behind the move to cancel the program. He explained that the decision was a combination of shifting priorities, low uptake, and trust in other filing platforms.<\/p>\n

\u201cI think that we have better alternatives, it wasn\u2019t used very much, and we think the private sector can do a better job,\u201d Bessent said.<\/p>\n

Former IRS Commissioner\u00a0Daniel Werfel<\/span><\/span>, who oversaw the creation of Direct File, said he wasn\u2019t surprised that the program is being discontinued.<\/p>\n

\u201cAt a minimum, I don\u2019t think it was very popular with Republicans. But also \u2014 the shutdown \u2014 it\u2019s another thing on the plate [for the IRS], and you have to start downsizing,\u201d Werfel told\u00a0Tax Notes<\/em>\u00a0November 5.<\/p>\n

Divisive<\/h2>\n

Direct File was the target of criticism from commercial tax return preparation giants like\u00a0Intuit<\/span><\/span>\u00a0and\u00a0H&R Block<\/span>, which called it a costly and unnecessary overreach of IRS authority. Republican lawmakers were also vocal in their opposition to the program, writing multiple letters urging its dismantling.<\/p>\n

Several companies that participate in Free File, or were once part of the program, are members of the American Coalition for Taxpayer Rights \u2014 a group of tax software companies that lobbied against Direct File \u2014 including TaxSlayer and TaxHawk.<\/p>\n

\u201cIt\u2019s not surprising since the Trump administration sabotaged Direct File all through this year\u2019s filing season at the urging of tax prep monopolies like TurboTax,\u201d said Adam Ruben of the Economic Security Project, which supported the tool. \u201cTrump\u2019s billionaire friends get favors while honest hardworking Americans will pay more to file their taxes.\u201d<\/p>\n

The IRS team behind Direct File was dispersed through a combination of resignations and other separations stemming from the Trump administration\u2019s efforts to shrink the federal workforce.<\/p>\n

Several Democratic lawmakers had advocated for Direct File, calling it a necessary public service that countered the cost of filing through major return preparers.<\/p>\n

In a November 4 statement,\u00a0Senate Finance Committee<\/span><\/span>\u00a0ranking member\u00a0Ron Wyden<\/span><\/span>, D-Ore., slammed the decision to shut down the program.<\/p>\n

\u201cThe Trump administration operates like a laser-guided weapon aimed at any useful public service that saves Americans time and money,\u201d Wyden said. \u201cThe only thing Trump accomplishes by doing this is stealing from working class taxpayers to pad the profits of giant, rent-seeking tax software companies.\u201d<\/p>\n

Long Awaited<\/h2>\n

House taxwriters\u2019 first draft of the OBBBA\u00a0had sought<\/a>\u00a0to explicitly end Direct File \u2014 but the language was removed amid negotiations over what provisions in the massive bill might clash with the Senate\u2019s Byrd rule restricting what kind of provisions can be included in a reconciliation bill.<\/p>\n

As part of the Direct File report, the agency\u00a0surveyed taxpayers<\/a>\u00a0regarding what they would like to see in a free filing platform. But if respondents said they would be interested in a tool like Direct File, the survey asked if that support would continue knowing that \u201csetting up and running the program is expected to have an initial cost to the federal government of at least $10-$20 per return processed.\u201d<\/p>\n

In its report, Treasury said it received more than 50,000 responses to the survey during the two weeks that the survey link was available, \u201creflecting strong apparent interest in free filing options.\u201d<\/p>\n

\u201cBecause the results are not statistically representative, they are being used for informational purposes only and are not incorporated into this report,\u201d Treasury said. \u201cA new, statistically representative survey will be conducted to better assess taxpayer interest in both a taxpayer-funded, government-run service and private-sector free filing options.\u201d<\/p>\n

\"\"<\/a><\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Treasury\u00a0announced in a new report to Congress that the\u00a0IRS\u2019s\u00a0Direct File tool will be suspended in favor of improving Free File \u2014 the IRS\u2019s long-standing partnership with private tax software companies 1\/16\/26 – \u201cThe report announces that the IRS will suspend Direct File,\u201d Treasury said in the report, which is dated October 2 but was released […]<\/p>\n","protected":false},"author":1,"featured_media":29060,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-38901","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-breaking","last_archivepost"],"_links":{"self":[{"href":"https:\/\/postalemployeenetwork.com\/news\/wp-json\/wp\/v2\/posts\/38901","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/postalemployeenetwork.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/postalemployeenetwork.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/postalemployeenetwork.com\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/postalemployeenetwork.com\/news\/wp-json\/wp\/v2\/comments?post=38901"}],"version-history":[{"count":2,"href":"https:\/\/postalemployeenetwork.com\/news\/wp-json\/wp\/v2\/posts\/38901\/revisions"}],"predecessor-version":[{"id":38903,"href":"https:\/\/postalemployeenetwork.com\/news\/wp-json\/wp\/v2\/posts\/38901\/revisions\/38903"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/postalemployeenetwork.com\/news\/wp-json\/wp\/v2\/media\/29060"}],"wp:attachment":[{"href":"https:\/\/postalemployeenetwork.com\/news\/wp-json\/wp\/v2\/media?parent=38901"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/postalemployeenetwork.com\/news\/wp-json\/wp\/v2\/categories?post=38901"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/postalemployeenetwork.com\/news\/wp-json\/wp\/v2\/tags?post=38901"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}