Trump administration kills popular free tax return program, raising costs for taxpayers
The IRS Direct File program was expected to save American taxpayers $11 billion annually, but was opposed by tax preparation companies.
President Donald Trump’s administration announced on Nov. 3 that it was canceling the IRS Direct File program for the 2026 tax filing season, according to an ABC News report. The popular program, created under President Joe Biden, allowed taxpayers in participating states to easily file their tax returns online for free.
“It wasn’t used very much,” Scott Bessent, who is both treasury secretary and acting IRS commissioner, told reporters. “And we think that the private sector can do a better job.”
The Direct File program, created through the 2022 Inflation Reduction Act, enabled up to 30 million taxpayers to automatically import earnings data from IRS records and to file federal and state tax returns at no charge. It was available for almost everyone residing in participating states who earned $200,000 or less per year. For the 2025 tax filing season, 25 states opted into the program, and nearly 300,000 taxpayers participated.
According to a David Binder Research survey, 74% of taxpayers who participated in a 2024 Direct File pilot program recommended it over other filing options. A March 2024 analysis by the progressive nonprofit Economic Security Project predicted that the program would save taxpayers $11 billion annually on tax preparation costs, save them hours of tax prep time, and help lower-income families find about $12 billion in unclaimed tax credits.
Private for-profit tax preparation services like TurboTax and H&R Block stood to lose a significant portion of their revenue if Americans used the free IRS system instead of paying them an annual average of $140 per person for tax preparation services, according to an ABC News estimate. The industry, which spent millions on lobbying Congress, strongly opposed the program, as did its Republican legislative allies.
The cancellation comes as the Trump administration claims it plans to pivot in 2026 to focusing on affordability. Trump promised in August 2024, “Starting on day one, we will end inflation and make America affordable again, to bring down the prices of all goods.” However, his tariffs on imported goods and services have helped fuel continuing inflation.
The White House and the IRS did not immediately respond to requests for comment for this story. However, on Nov. 5, White House deputy chief of staff James Blair told Politico: “I think you’ll see the president talk a lot about cost of living as we turn the year and into the new year. The president is very keyed into what’s going on, and he recognizes, like anybody, that it takes time to do an economic turnaround, but all the fundamentals are there, and I think you’ll see him be very, very focused on prices and cost of living.”
New Jersey was one of the states that opted in to the program for 2025. If the program were allowed to continue operations, the Economic Security Project’s analysis estimated, taxpayers would save $534 million annually through the program: $222 million on tax filing fees, $83 million in time costs for filing, and about $228 million in unclaimed credits.Â
