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Free tax filing program could soon be axed by the IRS. Here's what to know
During a tax summit on July 28, IRS Commissioner Billy Long said the cost-free service is 'gone,' according to Bloomberg Tax.
'Big beautiful Billy wiped that out,' he added, referencing the sweeping congressional spending bill signed into law by President Donald Trump on July 4.
The bill does not outright end Direct File, but it allocated $15 million to the Treasury Department to establish a task force to review the program and assess other options.
An IRS spokesperson confirmed the agency is awaiting the task force's findings, which must be delivered to Congress within 90 days.
'We look forward to Treasury's forthcoming report to Congress on the Direct File program and on potential public-private partnership alternatives to Direct File, as required by the One Big Beautiful Bill,' the spokesperson said in a statement to McClatchy News.
'Long is committed to modernizing the IRS and providing a taxpayer experience that meets today's expectations, which includes giving taxpayers transparency into the status of their tax returns and audits,' the statement said.
The Direct File program allows eligible taxpayers in certain states to electronically file their federal tax returns directly on the IRS website at no cost.
The agency launched the pilot program in 2024, under then-President Joe Biden, making it available to taxpayers in 13 states. It was later expanded to include 25 states, including California, New York, Florida, Texas, Illinois, North Carolina and Pennsylvania.
Residents of these 25 states reporting W-2 wage income, Social Security income, retirement income, and other credits and deductions are able to use the free service. But, taxpayers with business, rental or gig economy income are ineligible.
The IRS website has a brief survey, allowing taxpayers to determine whether they are eligible.
The Treasury Department said in October that more than 30 million Americans would be eligible to use the service during the 2025 tax season.
Many Republicans have expressed criticism of the Direct File program, arguing it poses a number of problems.
'The program's creation and ongoing expansion pose a threat to taxpayers' freedom from government overreach,' a group of 29 House Republicans said in a December letter to Trump.
They argued that the IRS faces a conflict of interest in preparing tax returns because it simultaneously acts as the tax collector and enforcer.
The agency 'has little incentive to ensure hardworking Americans do not pay more than they owe in taxes and may instead benefit from families and small businesses paying greater amounts than they are required by law,' the letter said.
Sen. Mike Crapo, an Idaho Republican, has also said it's unclear whether the program is legal without congressional approval.
Democrats, on the other hand, have long defended the pilot program, contending it saves taxpayers time and money.
In a January letter to Treasury Secretary Scott Bessent, then a nominee for the role, dozens of Democratic senators and representatives lauded the successes of Direct File.
They said it had saved $5.6 million in tax preparation fees in its first year and was on track to save $11 billion per year 'at scale.'
Since reports of the IRS' plan to axe the program emerged, several Democrats have expressed their disapproval.
'Direct File was an easy way for Americans to file their taxes for FREE each year,' Sen. Elizabeth Warren, a Massachusetts Democrat, wrote on X.
'It's a no-brainer — and it's popular. So why in the world did the Trump administration kill it?' she added. 'To give a huge handout to giant tax prep companies like TurboTax that rip Americans off.'
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