Trump administration set to end IRS’s Direct File program, per source

The Trump administration has decided to terminate the IRS’s Direct File program, according to a source familiar with the situation, putting an end to the free electronic filing system that congressional Republicans and the tax preparation industry have had in their crosshairs since its creation.

Work on Direct File began during Joe Biden’s presidency, bringing together some of the administration’s top technical and product minds and tapping into funds from the Inflation Reduction Act. Providing all U.S. taxpayers with a free filing tool would have put the country in line with most developed nations.

But despite what the IRS considered to be a successful launch last year, Direct File’s future was murky after President Donald Trump’s election and the administration’s welcoming of Elon Musk’s DOGE into the government tech world.

The pending elimination of the free filing tool was celebrated Wednesday by the makers of TurboTax. Derrick Plummer, an Intuit spokesman, called Direct File “a solution in search of a problem, a drain on critical IRS resources and a waste of taxpayer dollars.” 

Consumer advocate groups panned the Trump administration’s decision. Susan Harley, managing director of Public Citizen’s Congress Watch division, said in a statement that scrapping Direct File “is almost literally taking money out of our pockets.”

“Taking away a tool that saves millions of Americans money to boost the tax prep industry’s profits is another corrupt giveaway to Big Business,” Harley said. “Taxpayers who used Direct File were overwhelmingly satisfied with it, despite repeated efforts by administration insiders to suffocate it from behind the scenes and fears stoked by IRS data sharing.”

The Treasury Department, the IRS’s parent agency, did not respond to a request for comment by the time of publication. 

The creation of Direct File was several years in the making. IRS and U.S. Digital Service experts who led the project took a “cautious” approach to their work, building a product that they were confident had the ability to scale, while avoiding big risks and focusing on “executional certainty.”

The fruits of that labor were realized in 2024 with the launch of the Direct File pilot, providing taxpayers in a dozen states with the option to electronically file their federal returns directly with the agency at no cost. The tax agency said after last year’s filing season that 140,000 taxpayers used the system, claiming more than $90 million in refunds and reporting $35 million in balances due.

“We saw a strong response from the pilot, and Direct File’s users generally found it fast and easy to use,” then-IRS Commissioner Danny Werfel said at the time. “This is an important part of our effort to meet taxpayers where they are, give them options to interact with the IRS in ways that work for them and help them meet their tax obligations as easily and quickly as possible.” 

After an agency review of the pilot’s results, Werfel announced a month later that Direct File was here to stay, saying that taxpayers who used the tool delivered a “clear message” to the agency in wanting “one no-cost option for filing electronically.”

The program’s permanent status didn’t quiet the tax preparation industry or GOP lawmakers. Last June, House Republicans’ Financial Services and General Government Appropriations Bill sought to zero out Direct File via a policy rider to prohibit the funding of “a government-run tax preparation software that Congress has not authorized.” 

Direct File also faced sustained attacks from state attorneys general and state treasurers and comptrollers, while other critics pointed to Government Accountability Office findings that cost estimates for the program were incomplete. 

Despite the coordinated opposition, Direct File entered its second tax season with 25 states participating, doubling last year’s number and allowing nearly 30 million people to file their taxes for free.

During the program’s 2024 pilot program, Code for America also launched FileYourStateTaxes, a companion filing tool that allowed Direct File taxpayers in Arizona and New York to easily file their state returns, too. This year, Idaho, Maryland, New Jersey, and North Carolina also joined the program. 

Treasury Secretary Scott Bessent said during his Senate confirmation hearing that Direct File would be operational this filing season, providing a glimmer of hope to Democrats that championed the program. But the nomination of former Missouri GOP Rep. Billy Long — who previously introduced legislation to abolish the IRS — and the chaotic insertion of Musk’s DOGE into federal IT systems signaled an untimely end for Direct File. 

The Associated Press, which broke the news of Direct File’s elimination, reported last month that Direct File was in danger of DOGE’s metaphorical chainsaw. 

Earlier this year, Amanda Renteria, CEO for Code for America, the civic tech nonprofit that helped the IRS build the tool, told StateScoop that the Trump administration, which she said has shown a propensity for modernization and technology, should reconsider shelving the tax-filing tool. Renteria said she considers the recent announcement a step backward for the administration, contributing to the public’s already waning faith in government. 

“The decision to kill Direct File comes at a critical moment when faith in public institutions is already at historic lows,” Renteria said in an emailed statement. “This isn’t just a step backward for tax administration — it’s a betrayal of public trust at precisely the time government should be demonstrating its ability to deliver basic services effectively.”

Prior to Wednesday’s news, Renteria said Code For America had been discussing contingency planning with some of the program’s participating states, in the event Direct File was ultimately shuttered. 

“We’ve done a lot of scenario planning already with states in various different program areas, including this one, [and] they’re beginning to see that we’ve got to get our systems in place in order to manage all the changes that are happening at the federal level,” Renteria said, “including if customer service isn’t as good at the IRS, how do we make sure our Department of Revenues can fill that gap?” 

Renteria said that it’s unclear exactly when DirectFile will end, but she strongly encouraged tax filers to take advantage of the program while it’s still available for use. 

“It’s still open, do it now,” Renteria said. “We have no idea exactly when this thing is going to stop, but the more we can get people to see what is possible, the better we are for the future.”

Beyond the cancellation of Direct File, the IRS has found itself in near-constant turmoil since Trump’s inauguration. In February, the agency cut roughly 7,000 probationary workers, and is reportedly considering additional layoffs that would halve its 90,000-person staff. In late March, 50 IT executives were placed on administrative leave. 

DOGE also eliminated the IRS’s Transformation and Strategy Office, according to a former agency IT executive. And this week, Rajiv Uppal, the agency’s chief information officer, announced that he’d be leaving the IRS later this month.