Article Summary –
The IRS Direct File program, created under President Biden’s administration through the 2022 Inflation Reduction Act, allows up to 30 million taxpayers to file their returns for free by importing earnings data automatically, and was reported to save taxpayers $11 billion annually on preparation costs while assisting lower-income families in claiming $12 billion in unclaimed tax credits. Despite its benefits, the program faces cancellation by the Trump administration, influenced by strong opposition from the tax preparation industry and their Republican allies in Congress who argue that it is wasteful and cite debunked claims of IRS misconduct. The program, which was operational in 25 states and recommended by 74% of its pilot participants, remains a contested issue as some states like Michigan consider joining in the future to realize significant potential savings for taxpayers.
An Internal Revenue Service program, allowing free direct online tax filing for millions in 25 states in 2025, faces discontinuation under President Donald Trump’s administration, as reported by the Associated Press on April 17. Developed during President Joe Biden’s term via the 2022 Inflation Reduction Act, the Direct File system allows up to 30 million taxpayers to import earnings data from IRS records to file both federal and state returns without fees.
Previously, taxpayers compiled data themselves or used paid services like TurboTax and H&R Block, which charged fees. Those services participated in a program for free federal filing but only 2% utilized it. Direct File was available to taxpayers in participating states with annual earnings of $200,000 or less.
The AP noted that IRS employees were informed in March to stop preparing Direct File for next year’s season. Many low-income individuals don’t need to file returns, yet miss potential refunds by not filing. This quick, free program aimed to ensure they access such refunds.
Direct File was projected to save taxpayers $11 billion annually on preparation costs and benefit families with $12 billion in unclaimed credits, according to the Economic Security Project in March 2024. In Michigan, not one of the participating states, an analysis predicted $578 million annual savings if included.
The IRS piloted Direct File in 2024. A survey by David Binder Research showed 74% of users preferred it over other options. The tax preparation industry and Republican Congress members have opposed the program, labeling it wasteful. They urged its removal, with claims of IRS misuse of power.
The Treasury Department and the IRS have not commented on the situation. “The Direct File remains open, providing a simple, secure, and free filing option for 25 states,” Economic Security Project’s Adam Ruben stated in February, emphasizing the tool’s benefits for millions in tax credits.
Ruben criticized the decision to end the program, stating, “Everyday taxpayers play no role in this decision,” conveying frustration over unmet cost-saving promises for families.
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