Article Summary –
The IRS announced its plan to expand the free Direct File service to allow 30 million taxpayers to import earnings data and file 2025 tax returns, despite opposition from 29 House Republicans who argue it threatens taxpayer freedom and is wasteful. A successful 2024 pilot program showed Direct File could save Americans $11 billion annually, particularly benefitting lower-income families by enabling them to claim $12 billion in unclaimed tax credits. While popular among consumers, the program faces resistance from tax preparation companies, who have heavily lobbied against it, and some Republican lawmakers, including those with financial ties to tax preparation firms, have attempted to legislate its end.
The Internal Revenue Service announced on Jan. 10 that its free Direct File service will soon allow up to 30 million American taxpayers to automatically import their earnings data to the service and to easily file their 2025 tax returns, according to the Washington Post. However, 29 Republicans in the House of Representatives, including Pennsylvania Rep. Mike Kelly, are urging the incoming administration to scrap the program entirely.
Following a successful pilot in 2024, the IRS offers Direct File to taxpayers in 25 states. Those with simpler incomes and deductions living in Pennsylvania or other participating states can file directly online starting Jan. 27 without paying for tax software.
A March 2024 analysis by the Economic Security Project predicted Direct File would save Americans $11 billion annually on tax prep and help low-income families leverage $12 billion in unclaimed credits. By 2029, Pennsylvanians could save an estimated $747 million annually, including $311 million in filing fees.
In December, Kelly and 28 House Republicans wrote to President-elect Donald Trump to demand the program’s end: “We urge action to terminate the IRS’s unauthorized and inefficient Direct File pilot program, which infringes on taxpayers’ freedom and brings high costs.”
Kelly’s office and Trump’s transition team did not respond to requests for comment.
Contrary to claims of unauthorized operation, a report by the Congressional Research Service in May 2024 noted that President Joe Biden’s 2022 Inflation Reduction Act authorized the IRS to spend $15 million studying a direct-file tool with multilingual, mobile-friendly features.
Seventy-four percent of the 2024 pilot program’s users recommended it over other filing options, according to a David Binder Research survey.
While the Direct File program is popular among consumers, tax preparation firms have spent millions on lobbying against it.
According to Federal Election Commission data, Kelly has received $11,000 from H&R Block’s PAC and $8,000 from Intuit’s PAC since 2013. Both sell tax prep services.
Pennsylvania Republican Rep. Guy Reschenthaler and 18 other House Republicans proposed the IRS Overreach Protection Act to end Direct File and prevent federally funded free filing programs. The proposal was not voted on.
“People love Direct File because it saves time, money, and eliminates tax filing headaches,” said Economic Security Project senior director Anna Aurilio. “Tax prep companies opposing this free service just want to profit. We are thrilled more states are expanding options, and Congress should support Direct File.”
—
Read More Pennsylvania News
