Treasury moves to shut down IRS Direct File

RIP IRS Direct File

Treasury told Congress it wants the IRS to pull the plug on Direct File, the government’s homegrown tax software, and focus instead on fixing Free File and volunteer prep programs.

The report, dated Oct. 2 but released Nov. 5, 2025, says Direct File reached only a sliver of taxpayers, cost hundreds of dollars per return, and distracted the IRS from bigger modernization priorities. Treasury says it can expand free filing faster and more cheaply by improving promotion, oversight, and coordination with private software partners.

The Law in Play

Under Section 70607 of the One Big Beautiful Bill Act, the Treasury had to tell Congress whether the IRS should continue to run Direct File or find another way to offer free returns.

Supporters say taxpayers should be able to file directly with the IRS, especially when commercial software nudges them toward paid upgrades. Critics point out that Direct File served less than 1% of filers, cost tens of millions to run, and duplicated services the private…