Trump Plan to End Free ‘Direct File’ Program and Rely on For-Profit Tax Preparers Is a Mistake

The Trump Administration announced it is ending the IRS’s free tax filing program, Direct File, even though independent groups deemed it a success and users across the political spectrum rated their experience highly. This decision may not be surprising given opposition from congressional Republicans and industry lobbyists to Direct File. But it is a bewildering choice, particularly given low- and middle-income taxpayers’ concerns around affordability, to end a popular government-provided program that saves people money by allowing them to file their taxes for free. Moreover, there is good reason to be skeptical of the Administration’s plan to rely on commercial tax preparation companies to provide free filing options, as it is likely, and not surprising, that these firms’ for-profit motives will overshadow their commitment to helping taxpayers file for free.

The Direct File program showed that the government can effectively use technology to save tax filers time and money. The Inflation Reduction Act required the IRS to commission an independent study on the feasibility of the government creating a free tax filing program. Based on the study’s results, the IRS developed and rolled out a pilot version in 2024, followed by an expanded version for 2025, with plans to continue expanding in later years.

The IRS rolled out Direct File gradually to ensure a high level of quality at each stage. The 2024 pilot covered taxpayers with a limited range of income sources (income from wages and salaries, Social Security, and less than $1,500 of interest), and while participants could claim the Child Tax Credit and Earned Income Tax Credit, the tool did not include those who itemize deductions. The IRS widened the scope of the program in 2025: the number of participating states doubled from 12 to 25, and taxpayers could include other income sources (including additional retirement income, unemployment, and unlimited interest income) and tax credits (such as premium tax credits).

Customer satisfaction with the new program was high, with 94 percent of Direct File users in 2025 describing their experience as “excellent” or “above average.” The Government Accountability Office (GAO) deemed the Direct File pilot a success and recommended that the IRS expand the tool to taxpayers in all states. The Taxpayer Advocate Service declared that Direct File allowed taxpayers to “easily file accurate tax returns fast,” and the Treasury Inspector General for Tax Administration recommended continued expansions and improvements.

Despite Direct File’s broad popularity among users, a Trump Treasury Department report offered a contorted rationale for the decision to end the program. The report said that only 15 percent of taxpayers would choose Direct File, but this is misleading because:

• 48 percent would prefer to keep filing as they do now — but only “if it were free;” and
• 37 percent would prefer a “return free” option in which the IRS would pre-populate a taxpayer’s return and essentially prepare the return — effectively seeking an expanded version of Direct File with features that only the IRS could provide (and which the Trump Administration would obviously oppose).

Instead of Direct File, the Treasury report signaled plans to reinvigorate the “Free File” program, where commercial tax preparation companies agree to offer limited services to certain tax filers for free. This program was widely criticized for misleading tax filers, so that they ended up paying to file their returns, despite being eligible to file for free. ProPublica exposed these efforts — which included, for example, using special coding language to hide free products from search engine results — and the Federal Trade Commission subsequently took action against Intuit, the parent company of TurboTax, for engaging in deceptive advertising practices.

A recent comment from the CEO of H&R Block to Wall Street analysts highlights the clear problem of relying on profit-seeking businesses to offer their products for free:

“I think what we're getting better and better at is both understanding the cohorts of consumers that are likely free forever versus those predisposed to become paying over time, which requires us to get better and better at reaching them individually.”

In short, for-profit tax prep companies will continue to prioritize profits by driving people toward paid products while downplaying the needs of taxpayers who are likely to remain “free forever” — such as households with low and moderate incomes and those who file relatively simple returns. These are the very people Direct File, or any other taxpayer-focused free filing program, would serve.

Supporters of Direct File, return-free filing, and other taxpayer services that government can and should provide in the 21st century must not give up, and they should play the long game. This means scrutinizing how the industry responds during the upcoming filing season, working with states to continue to develop creative and easy-to-use free filing systems, and encouraging federal policymakers to push for a future return of the Direct File program.