Goodbye IRS Direct File: The reason why the Trump administration has axed the free tax filing system

An initiative under the Biden administration to make filing income tax returns easier and directly with the Internal Revenue Service has been binned by the Trump administration less than two years after it was launched. The White House claims that there are “better alternatives” to the tax agency’s in-house system that allowed taxpayers to electronically file tax returns for free.

Treasury Secretary Scott Bessent, who is also the acting IRS commissioner, said when announcing the decision that “it wasn’t used very much, and we think that the private sector can do a better job.” According to a Treasury Department report to Congress, while less than 300,000 Americans submitted accepted tax returns to the IRS’ system for the 2025 tax season, that was more than double the amount from its pilot run during the 2024 tax season.

Why IRS’ Direct File was axed

One of the criticisms of the IRS’ in-house system is that there are already free tax filing systems available, thus detractors claimed it was a waste of taxpayers’ money. Private tax preparation companies, which provide both free and paid services, had been lobbying hard against the implementation of the IRS’ own system since its inception.

When Elon Musk came to Washington, the department that worked on the Direct File project became a target of his DOGE, and the billionaire said he had “deleted” it in early February. However, it wasn’t until mid-March that the staff working on Direct File had been told to stop further development for the 2026 tax filing season reported the Associated Press.

In its report to Congress this year, Treasury stated that demand for Direct File was “far below expectations” which was in part due to a lack of awareness, but also “confusion” over “eligibility restrictions tied to covered tax situations (rather than a simple income limit).”

However, it also points out that while its data shows there is “continued interest in free filing options,” that the existing options are falling under the radar too. The department argues for “refocusing IRS efforts on strengthening existing free filing programs, particularly Free File,” through which the IRS partners with tax preparation software companies.

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