House Republicans are advancing a budget bill that would eliminate the IRS Direct File tax program and replace it with a public-private partnership system that could allow 70% of Americans to file taxes for free.

At a Glance

• House Republicans’ budget reconciliation bill includes a measure to terminate the IRS’s Direct File platform within 30 days of enactment
• The bill proposes creating a task force to develop partnerships between the IRS and private tax preparation companies like TurboTax and H&R Block
• Up to $15 million would be allocated for a Treasury Department study on implementing a free filing system for 70% of taxpayers
• The Direct File pilot program launched in 2024 in 12 states and has since expanded to half the country
• Democrats oppose eliminating Direct File, arguing it benefits everyday Americans

Republican Plan to Overhaul Tax Filing

A Republican-driven budget reconciliation bill currently under consideration in the House contains provisions that would terminate the IRS Direct File program as part of broader fiscal reforms. The legislation would end the tax filing platform within 30 days of the bill becoming law, effectively reversing the IRS’s May 2024 announcement that Direct File would become permanent. The proposal comes as President Donald Trump urges lawmakers to pass legislation that would offset approximately $4.5 trillion in tax cuts, describing it as a “big, beautiful bill.”

Instead of Direct File, Republicans propose establishing a specialized task force to create public-private partnerships between the IRS and commercial tax preparation services like TurboTax and H&R Block. This collaborative approach aims to provide free tax filing options for nearly 70% of U.S. taxpayers while potentially reducing government expenditures on an in-house filing system. The bill authorizes the Treasury Department to use up to $15 million to analyze the feasibility and cost-effectiveness of this alternative approach.

Direct File’s Brief History and Current Status

The IRS Direct File program began as a pilot initiative in 2024, allowing taxpayers with simple returns in 12 participating states to file directly with the government at no cost. During its initial tax season, 140,803 returns were processed through the system. The program has since expanded to cover approximately half of the United States, with plans to continue growth before Republicans proposed terminating it. The IRS had announced in May that Direct File would transition from pilot status to become a permanent offering for eligible taxpayers.

“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.

Treasury Secretary Scott Bessent has pledged that regardless of the legislative outcome, Direct File will remain available for the current tax filing season. The partial commitment provides temporary certainty for taxpayers who have already begun using or planning to use the service, while the longer-term fate of the program remains contingent on congressional action. The assurance aims to prevent disruption during the ongoing tax filing period.

Political Divide Over Tax Filing Approaches

Democratic lawmakers have voiced strong opposition to terminating Direct File, arguing that its elimination would “hurt everyday Americans” who benefit from the straightforward, government-provided service. They maintain that the program offers taxpayers a secure, private option for filing returns without navigating commercial alternatives or paying for basic services. The partisan divide highlights fundamentally different philosophies about the government’s role in tax administration and the private sector’s involvement in essential civic functions.

The proposed elimination of Direct File also connects to broader technology initiatives within the federal government. Trump adviser Elon Musk has specifically mentioned terminating 18F, the digital services agency involved in developing Direct File and other government technology programs. This suggests the proposal is part of a larger Republican strategy to reassess federal technology initiatives and potentially shift more government functions toward private-sector partnerships that align with conservative governance principles.