Although the program has low utilization, the majority of taxpayers held a favorable view of it. Almost three- fourths of tax filers were interested in using Direct File, according to a December 2024 survey by the Urban Institute. Of the taxpayers who used Direct File this year, 94% said their experience was 'Excellent' or 'Above Average' in the IRS 2025 filing season report. KEY TAKEAWAYS A free tax preparation program used by thousands of taxpayers will not be available in the upcoming filing season. The ...

Core Insights - Direct File, a free IRS tax-filing tool, has been shut down less than two years after its launch due to shifting priorities and low participation rates [1][4][6] - The program was initially seen as a consumer win, allowing taxpayers to file federal taxes without commercial software, but ultimately faced high costs and underutilization [1][5][6] Summary by Sections Overview of Direct File - Direct File was created during the Biden administration as a no-cost filing platform, allowing eligible taxpayers to file directly through an IRS-operated online portal [2][17] - It operated alongside IRS Free File, which provides free access to tax-prep software for individuals with adjusted gross incomes of $84,000 or less [3][11] Reasons for Elimination - The IRS decided to terminate Direct File following a Treasury report that highlighted high costs and low participation, with only 140,803 users in its first year compared to initial estimates of 5 to 25 million [4][6] - The cost of the pilot program was initially reported at $24.6 million but was later revised to $31.8 million due to uncounted expenses, resulting in a processing cost of approximately $225 per return, significantly higher than projected [5][7] Political Reactions - Lawmakers expressed mixed reactions to the program's termination, with Republican lawmakers supporting the decision as a cost-saving measure, while Democrats criticized it as shortsighted [8][9] Future of Tax Filing Options - With Direct File discontinued, taxpayers can still utilize IRS Free File and other free options, which cater to different income levels and tax situations [10][11] - The IRS is focusing on strengthening Free File and similar partnerships rather than developing a new government-built tax tool in the near future [18]

Core Points - The Trump administration has ended the IRS Direct File program, which was designed to simplify tax filing for Americans and save costs [1][4] - Critics argue that Direct File was costly to develop and had low participation rates, with only 296,531 returns filed in its second year, representing less than 0.5% of total returns [4][5] - Former Treasury Secretary Janet Yellen estimated that the average American taxpayer spent $270 and 13 hours filing their tax return [2] Group 1: Direct File Program Overview - Direct File was launched as a pilot in 2023 for 12 states and expanded to 25 states in 2024 [1] - The program cost taxpayers at least $41 million, or approximately $138 per return, which critics claim understates the true costs [5] - Participation in Direct File was the lowest among free tax preparation programs, with just under 141,000 returns filed in the pilot year [4] Group 2: Alternatives to Direct File - Americans will need to use paper returns or other software options, with low-cost software providers available [7] - Free options include IRS Free File, which offers free tax preparation software for eligible taxpayers with an AGI of $84,000 or less [8] - Volunteer Income Tax Assistance and AARP Foundation's Tax-Aide provide free tax help, assisting nearly 1.7 million taxpayers in 2024 [8]