Americans will have one fewer free option to file their taxes in 2026 after the Trump administration killed IRS Direct File.
Direct File, launched during former President Joe Biden’s term, was meant to simplify federal tax filing for Americans and save them money. The program first launched as a pilot for tax year 2023 for taxpayers in 12 states to file their returns directly to the IRS. The program expanded the next year to 25 states.
Without it, Direct File supporters said Americans will end up spending more time and money to file their taxes. Former Treasury Secretary Janet Yellen who served under Biden estimated the average American taxpayer spent $270 and 13 hours filing their tax return.
“I wrote the bill that created Direct File because the existing free options were insufficient and the big tax prep companies had been caught red-handed using deceptive practices to scam taxpayers into overpaying,” said Senate Finance Committee Ranking Member Ron Wyden, D-Ore., in a statement.
Critics said Direct File cost taxpayers a lot of money to develop, but few Americans used it.
Direct File had the lowest participation of all free tax preparation programs, according to a House Ways and Means report. Just under 141,000 returns were filed during the tax year 2023 pilot program with a dozen states.
The next year with 25 states participating, 296,531 returns, or less than 0.5% of approximately 146 million total returns, were filed. Yet, the program cost taxpayers at least $41 million, or at least $138 per return, the report said.
Also, “because not all agency support functions were included in the cost of Direct File, the $41 million understates the true costs of developing, administering, and supporting Direct File for tax year 2024,” it said.
House Ways and Means Chairman Jason Smith from Missouri said in a statement “it turns out that taxpayers simply didn’t want to use the costly and ineffective government-run Direct File tax program either that would have made the IRS the tax preparer, filer, and auditor for Americans.”
Americans who were using Direct File will have to prepare a paper return or use another software, said Richard Pon, a certified public accountant in San Francisco. “But there are low cost software providers everywhere, and some offer free versions for those basically with a W2 or interest,” he said.
Some free options for taxpayers include:
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IRS Free File. Free tax preparation software, available only on IRS.gov, from eight private companies partnering with the IRS for eligible taxpayers. Last year, taxpayers qualified if 2024 adjusted gross income (AGI) was $84,000 or less. IRS Free File also provides fillable forms for use by any taxpayer, regardless of income, who is comfortable preparing their own return.
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Volunteer Income Tax Assistance/Tax Counseling for the Elderly. IRS certified volunteers at some community organizations who provide free tax help for eligible taxpayers including working families, the elderly, the disabled and people who speak limited English. AARP Foundation’s Tax-Aide, part of the Tax Counseling for the Elderly, is billed as the nation’s largest free, volunteer-staffed program to help people prepare and file taxes. In 2024, nearly 28,000 volunteers helped almost 1.7 million taxpayers file returns, it said.
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MilTax. A Department of Defense program that generally offers free return preparation and electronic filing software for federal income tax returns and up to three state income tax returns for all military members, and some veterans, with no income limit.
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H&R Block Online Free Edition. While H&R Block no longer participates in Free File, the tax preparation giant offers its own free service. According to the website, 52% of taxpayers qualify for Online Free Edition. You must have a relatively straightforward return.
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TurboTax Free Edition. TurboTax, too, offers free tax preparation to taxpayers with relatively simple returns. Roughly 37% of filers qualify.
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
This article originally appeared on USA TODAY: Direct File users will have to file free elsewhere this tax season
