The IRS’ free direct online tax filing tool is being eliminated. Here’s what you need to know.

The Internal Revenue Service’s free online filing system is no longer available, after being rolled out as a limited pilot program in 2024 under the Biden administration. The Direct File program allowed taxpayers in certain states to file federal tax returns online for free directly with the federal government. It was used by roughly 30 million taxpayers in 25 states for the most recent tax-filing season, with nearly 300,000 returns being filed through the program. Users of the program reported a positive experience with it.

However, the Trump administration and Republicans had been looking to eliminate Direct File, citing low participation and high costs of running the program. The Treasury Department stated in an October report to Congress that existing programs like Free File, which is a partnership with private tax preparation companies, were not being fully promoted or optimized. As a result, the IRS suspended the Direct File program, with Treasury Secretary Scott Bessent stating that the private sector could provide a better service.

Vanessa Williamson, a senior fellow at the Urban-Brookings Tax Policy Center, noted that for many taxpayers, the goal has always been to have a simple filing system where tax forms are pre-populated with accurate information. Direct File was working towards that goal, but it faced pushback from for-profit tax preparers who saw it as a threat to their business model.

The decision to end the Direct File program leaves Americans without an easy, free option to file directly with the IRS, especially as the upcoming tax season is expected to be complex. Free File is available for taxpayers with an adjusted gross income of $84,000 or less, but some users have reported having to pay for services they thought were free after inputting their information.

Adam Ruben, vice president of campaigns and political strategy at the Economic Security Project, stated that Direct File had saved users an average of $160 in filing fees. He emphasized that the decision to end the program would have a significant financial impact on taxpayers, costing them approximately $23 billion a year in filing fees and time costs. Additionally, the program would have helped Americans claim up to $12 billion in tax credits they qualify for but do not currently claim.

Consumers impacted by provisions in President Trump’s tax and spending law are urged to budget more time for filing taxes this year and consider using available free nonprofit tax preparation services. However, it is important to be aware of potential hidden fees when using these services. Keeping a close eye on the service used to file taxes can help avoid any misleading information about the cost.

In conclusion, the end of the Direct File program highlights the challenges faced by taxpayers in filing their taxes and the importance of ensuring access to affordable and efficient tax-filing options.