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Forbes
15-07-2025
- Business
- Forbes
The One Big Beautiful Bill Act Didn't Kill IRS Direct File But It Sure Feels Like It
NORTH HALEDON, NJ - APRIL 15: In this photo illustration, a 1040 U.S. Individual Income Tax Return document is seen on a desk on April 15, 2024 in North Haledon, New Jersey. (Photo illustration by) Getty Images Direct File is officially dead—at least that's the sense coming out of the IRS at the moment. A recent IRS press release reminds taxpayers who requested an extension that 'IRS Free File makes it easy.' That feels… innocuous, right? But the mention of Free File in the (very) brief 123-word press release, without referencing Direct File, which also remains open through October 15, 2025, suggests that the IRS is already ready to turn the page on the program. Free File is an existing program offered as part of a public-private partnership between the IRS and Free File Inc., formerly the Free File Alliance. Through this partnership, tax preparation and filing software providers make their online products available to eligible taxpayers (as compared to Direct File, an IRS program). Free File debuted in 2003, but not without controversy. It was developed to provide free e-filing services to most taxpayers, with the goal of helping the IRS meet the 80% e-file target established by the Restructuring and Reform Act of 1998. At the time, many wondered why the federal government partnered with the private tax prep industry instead of creating its own software. In 2002, Treasury Secretary Paul O'Neill made it clear to then IRS Commissioner Charles Rossotti that the agency should partner with the private sector. As a result, the government entered into a memorandum of understanding pledging not to enter the tax return software and e-file services marketplace. You'd assume taxpayers would flock to e-file for free. The e-file market did explode, but not necessarily for free services, leading to allegations that some providers were directing taxpayers to paid services. In 2019—the last year the Free File agreement was signed—up to 100 million taxpayers, or 70% of filers, were eligible to use Free File. The actual use was closer to 3%. In 2016, then-Forbes staffer Sam Sharf wrote an account of how, despite qualifying to file for free, it cost her $118.64 to file her 2014 tax return with TurboTax. A few years later, ProPublica wrote a series of articles focusing on the lengths to which it claims tax software companies went—such as extensive lobbying and hiding free options—to get taxpayers to pay for services. In April 2019, ProPublica noted, "Intuit has changed the code on its Free File page so that the actually free version of TurboTax is no longer hidden from Google and other search engines." H&R Block was also accused of purposefully steering taxpayers away from free products. The allegations created quite a stir—and resulted in litigation. Today, tax preparation software companies are prohibited from hiding free filing services from Google or other search results pages. Additionally, if you can't file for free after visiting a company's Free File website, you must be able to return to the Free File website to find another offer. Each IRS Free File company must provide information when you don't qualify, with a link to the Free File site. Following the changes, two traditional Free File participants, Intuit and H&R Block, opted out of the program. Eight private-sector Free File partners provided online guided tax software products in 2025: 1040Now, EzTaxReturn, FreeTaxUSA, OnLine Taxes, TaxAct, and TaxSlayer. Direct File The controversial Direct File program allows eligible taxpayers to file taxes directly with the IRS online for free. The word "controversial" is a nod to the fact that while the IRS touts the program as beneficial to taxpayers and says the initial feedback was overwhelmingly positive, some Republicans in Congress weren't happy with the program. As part of the Inflation Reduction Act, Congress tasked the IRS with delivering a report on, among other things, the cost of developing and running a free direct e-file tax return system. The report was to include he costs to build and administer each release, with a focus on multi-lingual and mobile-friendly features and safeguards for taxpayer data. The IRS released the report to Congress in May 2023. According to the report, most taxpayers surveyed by the agency had interest in using an IRS-provided tool to prepare and file their taxes. At the time, the IRS indicated it hoped to make that a reality for some taxpayers for the 2024 tax filing season. When the tax filing season opened in January 2024, the IRS announced a limited-scope pilot of Direct File, which it claimed would allow the IRS to evaluate the costs, benefits, and operational challenges associated with providing the option to taxpayers. The pilot, the IRS claimed, was a success. The tax agency said that Direct File users reported a high degree of satisfaction and quick answers to their filing questions. In a GSA Touchpoints survey of more than 11,000 Direct File users, 90% of respondents ranked their experience with Direct File as "Excellent" or "Above Average." Most survey respondents who filed taxes in the prior year reported having to pay to prepare their taxes last year. Among survey respondents, 47% of users paid to file their taxes last year, and 16% did not file last year at all. When asked what they particularly liked, respondents most commonly cited Direct File's ease of use, trustworthiness, and that it was free. According to the IRS, taxpayers filed—for free—to obtain more than $90 million in refunds and saved an estimated $5.6 million in filing costs. (You can read what some taxpayers had to say to Forbes about their experiences here.) After the first year, the Treasury Department declared that Direct File would be a permanent, free tax filing option. The IRS also expanded the program in 2025 to include more states and the ability to handle a wider range of income, credits, and deductions. 2025 Brought More Changes To Direct File The free tax software program had been marked as safe for the 2025 season, with now-Treasury Secretary Scott Bessent committing to the program during his confirmation hearing. "I will commit that for this tax season … Direct File will be operative," Bessent said. However, less than 48 hours after the end of the regular tax filing season, reports flew that the program would be axed. That was confirmed in May when the House version of what is now the One Big Beautiful Bill Act (OBBBA) included a provision to eliminate IRS Direct File. The original language directed Treasury to ensure that the IRS Direct File program has been "terminated" no later than 30 days after the bill became law. That bit didn't survive. But OBBBA does include a provision creating a task force to deliver a report on the 'cost of enhancing and establishing public-private partnerships which provide for free tax filing for up to 70 percent of all taxpayers calculated by adjusted gross income, and to replace any direct e-file programs run by the Internal Revenue Service.' The task force is also tasked with taking the pulse of the public on 'opinions and preferences regarding a taxpayer-funded, government-run service or a free service provided by the private sector.' The amount of money earmarked is $15,000,000. If you're feeling a bit of deja vu, you're not wrong. The Inflation Reduction Act of 2021—the law that led to the creation of Direct File—also established a task force to design a direct file tax return system. The task force was required to explore the "(I) the cost (including options for differential coverage based on taxpayer adjusted gross income and return complexity) of developing and running a free direct efile tax return system, including costs to build and administer each release, with a focus on multi-lingual and mobile-friendly features and safeguards for taxpayer data; (II) taxpayer opinions, expectations, and level of trust, based on surveys, for such a free direct efile system; and (III) the opinions of an independent third-party on the overall feasibility, approach, schedule, cost, organizational design, and Internal Revenue Service capacity to deliver such a direct efile tax return system." The cost? Also $15,000,000. Last Gasps From Congress Not everyone is giving up on the program. U.S. Rep. Emilia Sykes (D-Ohio) has introduced legislation to not only save, but expand, the program. The legislation, called the 'Get Your Money Back Act,' would fully reinstate the Direct File program, while requiring states to opt in to the service. 'For many, the tax filing season can be time-consuming, expensive, and confusing, even though most taxpayers have relatively simple returns, which is why the Direct File program was both effective and popular,' said Sykes in a statement. 'Unfortunately, even before the Treasury Secretary ended the program, Ohioans weren't able to take advantage of this program because our state's government never opted in. My legislation would implement this successful program nationwide, improving everyone's experience with tax season.' Sykes officially introduced the legislation on June 30, 2025. It has since been referred to the House Committee on Ways and Means. There has been no additional action to date. Forbes Trump Administration Will Reportedly Nix IRS Direct File, Eliminating The Free Tax Filing Option By Kelly Phillips Erb Forbes House Tax Plan Would Kill Direct File And Rescue Controversial Contingency Fees By Kelly Phillips Erb Forbes IRS Announces Direct File Program Will Be Available In Twice As Many States In 2025 By Kelly Phillips Erb
Newsweek
11-07-2025
- Business
- Newsweek
IRS Issues Tax Filing Request to Thousands Before Fall Rush
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. The Internal Revenue Service has issued a request to thousands of taxpayers who sought extensions for their 2024 federal tax returns to file them during the summer months. The IRS emphasized that filing early can help taxpayers avoid the expected fall rush ahead of the October 15 deadline, potentially expediting payment plans or the resolution of issues that may arise during the filing process. The agency promoted its IRS Free File program, which provides free, guided tax preparation online for individuals with an adjusted income of $84,000 or less. The Internal Revenue Service building in Washington D.C. in 2021. The Internal Revenue Service building in Washington D.C. in 2021. Patrick Semansky/AP Why It Matters By encouraging early filing, the IRS seeks to reduce system bottlenecks caused by last-minute submissions in October—a period known for high traffic among extension filers. Missing the filing deadline can trigger penalties, interest and potential complications with future filings. The IRS Free File program's expansion to those earning $84,000 or less reflects ongoing efforts to make tax filing more accessible and cost-effective for everyday Americans. What To Know The IRS Free File program is available around the clock, offering guided, secure federal tax preparation and electronic filing at no cost for many Americans. The IRS' Free File Fillable Forms are also accessible to all taxpayers, regardless of income. These initiatives are designed to streamline the filing process, provide transparency and reduce errors for extension filers. Multiple secure payment methods are available—including IRS Online Account, IRS Direct Pay, the Electronic Federal Tax Payment System and major credit or debit cards. Immediate electronic payment confirmation is also provided. Taxpayers unable to pay their full balance may apply for a payment plan online. Short-term plans are available for those who owe less than $100,000, granting up to 180 days to pay. Long-term installment agreements, available for balances under $50,000, offer up to 72 months to pay. While interest and penalties continue, active installment agreements reduce the failure-to-pay penalty by half. What People Are Saying Jay A. Soled, a professor and chair of the Department of Accounting and Information Systems at Rutgers Business School, New Jersey, previously told Newsweek: "Even with the tax-filing extension, interest will apply to any 2024 tax payments received after April 15. This means that unpaid tax-year 2024 tax balances will begin accruing interest, currently at the rate of seven percent per year, compounded daily, after April 15, 2025." Richard D. Pomp, a professor of law at the UConn Law School, Connecticut, previously told Newsweek: "We are currently living through a total state of chaos at the IRS. Whenever possible, taxpayers abroad should file electronically and verify with screen shots and saved files, and copies of all documentation." What Happens Next The IRS is set to continue processing early extension filings over the summer. Its Free File resources are available until the October 15 deadline.
Newsweek
17-06-2025
- Business
- Newsweek
IRS Change Proposed In Senate Finance Bill
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Republican Senators have proposed getting rid of two of the Internal Revenue Service's free tax filing programs, which allow millions of Americans to file their taxes free of charge. The Senate Committee on Finance has unveiled its amendments to the One Big Beautiful Bill Act, which was approved by the House of Representatives in May. It includes a proposal to "terminate" the IRS Direct File, as well as investigating whether that and the Free File program could be replaced. Why It Matters The Associated Press reported earlier this year that the Trump administration plans to end the Direct File program, which is only in its second year. In February, former Department of Government Efficiency head Elon Musk said he had "deleted" an arm of the General Services Administration, known as 18F, which helped build and run the program, as part of his sweeping cutbacks across federal agencies. What To Know IRS Direct File is available in 25 states and allows taxpayers with relatively simple tax returns to file without the need for a third party. According to the IRS, some 30 million taxpayers were eligible to use Direct File to file 2024 federal tax returns during the 2025 tax filing season. Stock image/file photo: Internal Revenue Service sign at the IRS Building in Washington, DC in March 2018. Stock image/file photo: Internal Revenue Service sign at the IRS Building in Washington, DC in March 2018. GETTY Free File helps taxpayers with adjusted gross income under $84,000 per year file federal income tax returns online using guided tax preparation software. The proposals include a provision that would direct the Treasury Department to "terminate the current Direct File program at the IRS," as well as "author a report evaluating the establishment of a public-private partnership between the IRS and private sector tax preparation services to offer free tax filing, potentially replacing both the existing Direct File and Free File programs." Direct File has only been running for two years and was piloted in 12 states in 2024 for the 2023 tax season. The IRS described the initial launch as a success, with 140,803 taxpayers using it in its inaugural year and more than 3.3 million taxpayers across all states using the eligibility checker. It was later expanded to 25 states for the 2024 season. No information is publicly available for how many used the service this year. Newsweek has contacted the IRS via email for the figures. Democrats have previously expressed concerns over ending the program. A letter signed by approximately 200 lawmakers was sent to Treasury Secretary Scott Bessent in April of this year, requesting that the program be extended for the 2025 tax year. While the program is designed to help lower tax preparation costs for Americans, it has attracted some criticism. In May 2024, Tania Mercado, spokesperson for TurboTax's parent company Intuit, told Newsweek that the program is "a solution in search of a problem and every American can already file their taxes for free, without any cost to the government or taxpayers." What People Are Saying Democratic lawmakers in their letter to Bessent: "Ending this free, easy-to-use, and popular program would be an insult to American taxpayers, eliminating an important alternative to commercial options provided by the tax prep industry." Mercado, speaking to Newsweek in February 2024: "Direct File is not free tax preparation, but rather a thinly veiled scheme where billions of taxpayer dollars will be unnecessarily used to pay for something already completely free of charge today." What Happens Next No date has been given for when the termination of Direct File could begin. The Senate is looking to pass its amendments on the bill by Independence Day—July 4—at which point it would return to the House for a final vote before being signed by the president.
Yahoo
09-06-2025
- Business
- Yahoo
Fifteen years after shuttering its tax-prep app, Va. may be ready to compete with TurboTax again
A Resident Individual Income Tax Return form for Virginia residents. (Photo courtesy Virginia Tax) The Virginia Department of Taxation's website parts company with the web presences of other agencies in the commonwealth: It doesn't offer its own tools to help you complete your primary task there — taxes. While you can renew a car registration at the Department of Motor Vehicles site and register an LLC at the State Corporation Commission's site, Virginia Tax doesn't let you file your state income taxes online and instead points you to commercial tax-prep services. That's not because Virginia Tax hasn't developed its own filing app. It's because 15 years ago, the department shelved the iFile app that had already drawn more than 278,000 users in 2009. In 2010, then-Gov. Bob McDonnell, a Republican, signed a bill patroned by Del. Kathy Byron, R-Lynchburg, which had Virginia retire iFile and cede tax preparation to private providers that would offer apps for free to lower-income residents – the same proposition the Internal Revenue Service accepted in 2002. That removed a free option from higher-income taxpayers, with Intuit's market-leading TurboTax charging a state tax-prep fee that now stands at $64, despite the relative simplicity of the state's Form 760. Most other commercial tax-prep services charge for state filing, although Cash App Taxes does not. 'We should not have to pay a for-profit company in order to file our taxes easily,' Del. Kathy Tran, D-Fairfax, said after reviewing a constituent's complaints. But even taxpayers eligible to use Free File, historically around 70% of total users, have largely ignored it. In 2024, Virginia Tax processed 89,064 Free File individual returns – far fewer than the 4,128,006 total individual returns received electronically or the 446,782 filed on paper. Electronic returns cost 10 cents each to process and paper ones cost $5.96 each, Heather Cooper, Virginia Tax's director of communications and training, confirmed in an email. At the federal level, the IRS has downgraded from the Free File partnership. Pro Publica's coverage of how Intuit had made its Free File options hard to find online led to the IRS altering its Free File arrangement in 2019 to drop that deal's prohibition on competing with commercial tax-prep apps, and the IRS has now offered its Direct File app for two tax seasons in a row. Vanessa Williamson, senior fellow at the Urban-Brookings Tax Policy Center, called its popularity among users 'remarkable' — 74% of 440 respondents in a survey done after the 2023 tax-year filing season said they preferred it over other filing methods. 'The success of Direct File should be a model for the states,' she said. Virginia has not been among the 25 states supporting Direct File, but it may now be ready to reverse its own Free File decision — even as the Trump administration appears intent on scrapping Direct File. Two years after Tran introduced a bill to revive iFile that died in committee, the delegate sponsored a similar bill this year that would also have Virginia join Direct File. That one, with a companion measure sponsored by Sen. Jeremy McPike, D-Prince William, passed the General Assembly only to meet a veto from Republican Gov. Glenn Youngkin. Youngkin's veto message cited 'uncertainty' about Direct File's fate and also noted another recent advance towards returning Virginia to online filing: budgetary language requiring Virginia Tax's next revenue-management system to support 'an electronic filing system for individual income tax that can be used by all Virginians.' We should not have to pay a for-profit company in order to file our taxes easily. – Del. Kathy Tran, D-Fairfax Tran suggested that wording in the budget could be enough to accomplish her bill's goal, depending on how Virginia Tax interprets it. That interpretation could rely on who the next governor appoints to her cabinet, but the two presumptive candidates, former Democratic congresswoman Abigail Spanberger and Republican Lt. Gov. Winsome Earle Winsome-Sears, have not spoken out on this issue. A query to each campaign's press office went unanswered. Intuit questioned the need for a public tax-prep app. 'Free filing options for state tax preparation are already available today,' spokesperson Tania Mercado said. 'Filing federal and state taxes together and linking tax returns allows taxpayers to save time, ensure accuracy, improve privacy and data protection, and reduce the chances of tax refund fraud.' Opponents of direct filing also question whether public-sector developers would have the same motivations as private-sector counterparts. 'Additionally, the private sector would have an incentive to find as much savings as possible for taxpayers when preparing their taxes,' Americans for Tax Reform said in a 2010 statement commending Virginia joining Free File. Tran's reply: Nobody is banning commercial tax apps. 'Having a direct free file way for you to pay your taxes is not a requirement for you to use that option,' Tran said. 'That is a decision you as a taxpayer get to make.' In Maryland, the free iFile tax-prep app the state has offered since 2001 drew relatively few users this year: 39,717 returns out of more than 2.6 million submitted electronically, a little over half of the 76,918 paper returns handled as of early May, officials said. Almost 6,000 more returns came in via Maryland's Direct File portal using an interface developed by Code for America, Robyne McCullough, media relations director at the Maryland comptroller's office, said by email. When Maryland launched that partnership, officials estimated that almost 700,000 Marylanders would be eligible to use Direct File. But Maryland taxpayers have that choice, while Virginians do not. 'The thing preventing us from having a high-quality, free public tax preparation system is not technology or logistics, it's just politics,' said Williamson, the Urban-Brookings Tax Policy Center fellow.
American Military News
29-05-2025
- Business
- American Military News
IRS Direct File will be cancelled if Republican tax bill becomes law
The $3.8 trillion Republican tax bill that just passed the House includes a provision to kill off the popular IRS Direct File program, which lets people file their federal income tax returns for free online. The bill still needs to pass the Senate to become law, but if the bill is enacted as currently written, the Direct File program is slated to be eliminated within 30 days of the law's passage. The bill also requires the U.S. Treasury Department to create a task force to design a partnership between the IRS and private-sector tax service providers. The task force would need to identify ways to replace any 'free file programs and direct e-file tax return systems.' That includes the IRS Free File program, an existing public-private partnership. IRS Direct File, which is separate from the Free File program, is a popular free option that offers guidance and support as you fill out your federal income tax return and file your taxes directly with the IRS. Most taxpayers have rated the Direct File program positively: About 90% of taxpayers said their experience was excellent or above average, according to a survey by the General Services Administration of about 11,000 Direct File users in 2024. On top of that, interest in the program is clear: About 73% of taxpayers said they'd be somewhat or very interested in using Direct File, according to a Tax Policy Center report in March, based on a survey of taxpayers aged 18 to 64. The Direct File program has been in Republican lawmakers' crosshairs for a while. In December, almost 30 Republican lawmakers sent a letter to President-elect Donald Trump, calling for him to end the Direct File program on his first day in office. Lawmakers in the U.S. House of Representatives introduced legislation last July to end the Direct File program. Elon Musk, de facto head of the 'Department of Government Efficiency,' or DOGE — also isn't a fan of the program. In February, he posted on social media that the government tech office that developed the Direct File program had been 'deleted.' Currently, the IRS's Direct File page is still up and running. Direct File doubled its reach to 25 states for the 2025 tax season, up from 12 states in 2024, the program's pilot year. An estimated 30 million taxpayers qualify for the Direct File program in 2025, the IRS says. More than 140,000 taxpayers filed their federal tax returns through the Direct File program in 2024. The Direct File program also expanded to accept more types of tax situations for the 2025 tax season. While taxpayers who used the system in 2024 could claim a handful of tax credits, including the earned income tax credit and the child tax credit, that list expanded for this filing season to include the child and dependent care credit, among others. However, taxpayers who want to claim other tax credits, such as the American Opportunity Tax Credit for higher education costs, or the tax credit for the costs of adopting a child, won't qualify for Direct File. And if you're hoping to deduct IRA contributions, Direct File doesn't support that. (See the full list of credits and deductions supported by Direct File on this IRS page.) The Direct File program, now in its second year, allows taxpayers to file their federal tax returns electronically with the IRS. The no-cost tool guides taxpayers through every part of their federal income tax return. Taxpayers can file using a smartphone, computer or tablet. One of the program's advantages is that, if you have questions as you're working on your return, you can get live support directly from the IRS via chat or phone. IRS representatives can answer basic tax questions and help with technical issues in English and Spanish. The Direct File program has income limits, as well as limits on the types of income, deductions and credits you can enter on your tax return. For the 2025 tax season: —Your income must be less than $200,000 (less than $168,600 if you have more than one employer), and if you're married filing jointly, your spouse's income also must fall below these limits. —If you're married filing jointly, your combined income must be less than $250,000. —If you're married and file separately from your spouse, your income must be less than $125,000. To be eligible for Direct File, your income can come from the following sources: —W-2 wages —Social Security income —Unemployment compensation —Interest income —Retirement income (reported on a 1099-R — limited eligibility starts March 2025) But if you're self-employed, or have business or rental income, you can't use Direct File. Same goes for IRA contributions or distributions: If you have either, you can't use Direct File. You can use the IRS Direct File program only if you claim the standard deduction — the program isn't available to people who itemize. But you can claim certain above-the-line deductions: student loan interest, educator expenses and health savings account contributions. You can't use Direct File if you want to deduct your IRA contributions. The Direct File program supports the following tax credits in 2025: —Earned income tax credit —Child tax credit —Credit for other dependents —Child and dependent care credit —Premium tax credit —Credit for the elderly or disabled —Retirement savings contribution credit However, if you want to claim education credits, credits for energy efficient home upgrades or the adoption expense credit, you can't use the Direct File program. More taxpayers will have access to the IRS Direct File program in 2025. In 2024, the IRS kicked off the program with only 12 states; that number has expanded to 25 states for the 2025 tax season. For some of the states that participate in the IRS Direct File program, your federal return information will be transferred automatically to the state tax website, but in some cases you'll have to re-enter your information. Visit this IRS Direct File page to get the details for your state. Here is a list of the participating states: Alaska, Arizona, California, Connecticut, Florida, Idaho, Illinois, Kansas, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming If you don't qualify for the IRS Direct File program, you may have other options to file your tax return for free. In addition to Direct File, the IRS offers the Free File program, in which it partners with online tax software providers to provide free federal income tax return filing. Some providers also allow you to file a state income tax return. For the 2025 tax season, your adjusted gross income must be $84,000 or less to qualify for the Free File program. That AGI applies to any filing status: married filing jointly, single, head of household, etc. The IRS also offers the Volunteer Income Tax Assistance (VITA) program, which provides certified volunteers to prepare basic tax returns if you earn less than $67,000 a year, are disabled, or speak limited English. You can find a site near you by visiting this IRS page. ___ © 2025 Distributed by Tribune Content Agency, LLC.
