Republican lawmakers unveil a plan to scrap the IRS Direct File program and replace it with a public-private partnership that would still offer free tax filing for most Americans.
Quick Takes
- The GOP budget reconciliation bill would terminate the IRS Direct File program within 30 days of enactment
- A new task force would develop partnerships with private tax services like TurboTax and H&R Block
- The proposal allocates $15 million to evaluate a system allowing 70% of Americans to file for free
- Treasury Secretary Scott Bessent has committed to maintaining Direct File for the current tax season
- President Trump has called for legislation to offset $4.5 trillion in tax cuts
GOP Moves to End IRS Direct File
House Republicans are moving forward with a budget reconciliation bill that includes provisions to terminate the IRS’s Direct File platform, which allows taxpayers to file their returns directly with the government for free. The proposed legislation would shut down the service within 30 days of the bill’s enactment, marking a significant shift in tax filing policy under President Trump’s administration. The Direct File program, which began as a pilot in 2024 and was later announced as permanent by the IRS in May of that year, has expanded from its initial 12-state launch to now cover approximately half the country.
The push to eliminate Direct File comes as President Trump urges lawmakers to pass legislation that would cut spending to offset approximately $4.5 trillion in tax cuts. This reconciliation bill represents part of that broader fiscal strategy, aiming to restructure how Americans interact with the tax system while maintaining access to free filing options. Republicans have positioned this as a more efficient approach that leverages private sector expertise rather than expanding government services.
Public-Private Partnership Alternative
Rather than simply eliminating the free filing option, the Republican proposal outlines a path forward through public-private partnerships. The legislation calls for creating a task force that would develop collaborative relationships between the IRS and established tax-preparation companies like TurboTax and H&R Block. This approach aims to maintain free tax filing capabilities for approximately 70 percent of U.S. taxpayers while shifting the operational responsibility away from direct government management.
“I will commit that for this tax season that Direct File will be operative and the American taxpayers who choose to use it will,” said Bessent.
The legislation authorizes the Treasury Department to use up to $15 million to analyze the costs and feasibility of replacing Direct File with a new service framework. This analysis would evaluate various models for delivering free tax filing services through these partnerships, examining technical requirements, security protocols, and overall efficiency. Treasury Secretary Scott Bessent has already committed to maintaining Direct File through the current tax season, providing a transition period as the potential new system is designed.
An under the radar part of Republicans' tax plan: they're going to end the incredibly popular free direct tax filing service. Trump will force you to fork out hundreds of dollars each year to TurboTax so he can give tax breaks to billionaires. https://t.co/bzxU1BJYEn
— Ron Wyden (@RonWyden) May 14, 2025
Political Divisions Over Tax Filing Future
The proposal has created predictable partisan divisions, with Democratic lawmakers voicing strong opposition to terminating the Direct File program. They argue that the current system, which handled 140,803 returns during its initial pilot phase, provides a valuable service that directly benefits average Americans. Democrats maintain that the government-run program ensures data security and eliminates the upselling tactics often associated with commercial tax preparation services.
The future of tax filing also appears connected to broader government technology initiatives. Trump adviser Elon Musk has mentioned plans to terminate 18F, the government technology agency involved in developing Direct File and other digital programs. This signals a more comprehensive approach to reforming government technology services beyond just tax filing. President Trump has described the overall budget reconciliation effort as a “big, beautiful bill,” highlighting its importance within his administration’s fiscal priorities.
Implementation Timeline
If passed, the transition away from Direct File would happen relatively quickly, with the program being discontinued within a month of the bill becoming law. However, the development of the replacement public-private system would likely take longer, with the $15 million analysis serving as the first step toward designing the new framework. The task force would need to establish parameters for collaboration with private tax services while ensuring that the free filing promise remains intact for the targeted 70 percent of taxpayers.
While the current tax season’s filing options would remain unchanged according to Treasury Secretary Bessent’s commitment, taxpayers may face a different landscape for the 2026 filing season if the legislation passes. The bill represents a significant philosophical shift in how government services are delivered, moving from direct government provision to facilitate private sector solutions – a change that aligns with traditional conservative approaches to limiting direct government services in favor of market-based alternatives.
