Originally published IRS would eliminate Direct File under Trump-backed budget reconciliation bill on by https://federalnewsnetwork.com/congress/2025/05/irs-would-eliminate-direct-file-under-trump-backed-budget-reconciliation-bill/ at Federal News Network
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A sweeping bill outlining billions of dollars in federal spending cuts would officially terminate Direct File, the IRS’ free, online tax filing platform that’s been running for the past two years.
The 2025 budget reconciliation package House Republicans introduced last Sunday authorizes at least $880 billion in spending cuts, with most of those cuts targeting Medicaid, according to the Associated Press.
President Donald Trump has repeatedly called on lawmakers to pass the “big, beautiful bill” as a way to offset the extension of $4.5 trillion in tax cuts.
The House Ways and Means Committee held a markup hearing Tuesday afternoon to advance a portion of the bill.
The AP reported in mid-April that the Trump administration planned to eliminate the IRS’ Direct File program — just days after the tax filing season deadline.
The budget reconciliation bill would require the Treasury Department to terminate the Direct File program “as soon as practicable,” but no later than 30 days after the bill is signed into law.
The Treasury Department would also launch a new task force under the bill, focused on replacing the current IRS Direct File system with “a better public-private partnership between the IRS and private-sector tax preparation services.”
The bill would authorize the Treasury Department to spend up to $15 million in unobligated funds on a report analyzing the cost of replacing Direct File with another platform that would allow 70% of all taxpayers to file their tax returns for free.
Treasury’s report would also include research on “taxpayer opinions and preferences regarding a taxpayer-funded, government-run service or a free service provided by the private sector,” as well as an estimate of how much the federal government should spend to advertise this new alternative to Direct File.
The Treasury Department would have 90 days to complete its report to Congress.
Republican lawmakers have pressed the Trump administration to pull the plug on Direct File, but administration officials haven’t publicly said what they plan to do with Direct File next year.
During his confirmation hearing, Treasury Secretary Scott Bessent told lawmakers that Direct File would remain “operative” during this year’s filing season.
“I will consult and study the program and understand it better and make sure it works to serve the IRS’ three goals of collections, customer service, and privacy,” Bessent told the Senate Finance Committee on Jan. 16.
Critics of the program say Direct File competes with software from tax-preparation companies, and that the IRS spent tens of millions of dollars to launch the platform.
Former IRS Commissioner Danny Werfel told reporters last year that launching Direct File cost nearly $32 million.
The IRS launched Direct File last year as a pilot in a dozen states. More than 140,000 taxpayers used the platform to file their tax returns.
Adam Ruben, vice president of campaigns and political strategy at the Economic Security Project, estimated that Direct File, now available in 25 states, saw double or triple the total number of users compared to last year.
The average taxpayer spends $160 filing their taxes every year. If the IRS expanded Direct File to cover the entire U.S. and cover most common tax situations, Ruben said the platform could save taxpayers $23 billion.
“That’s real money back in middle-class families’ pockets,” Ruben told Federal News Network in an interview last month.
The Trump administration has eliminated or greatly reduced the staffing of teams at other agencies that helped launch Direct File.
That includes the elimination of the 18F team at the General Services Administration and the firing of employees at the U.S. Digital Service — which is now called the “U.S. DOGE Service.”
Amy Paris, a former product manager at the U.S. Digital Service and one of the first members of the Direct File team, said that more than 90% of people who used the Direct File pilot last year were able to successfully file their taxes and rated their experience as excellent or above average.
“You cannot debate the fact that the people who use Direct File like using it,” Paris said. “If we kept doing more work like Direct File, and we did that for every single government interaction — for Social Security, for Medicare, applying for SNAP and WIC … If we just designed them the way that we designed Direct File, and we built out these programs in ways that actually work with the American people and use plain language, we could totally revitalize people’s faith in government,” Paris said.
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Originally published IRS would eliminate Direct File under Trump-backed budget reconciliation bill on by https://federalnewsnetwork.com/congress/2025/05/irs-would-eliminate-direct-file-under-trump-backed-budget-reconciliation-bill/ at Federal News Network
Originally published Federal News Network
