The Treasury Department will shut down Direct File, the Internal Revenue Service’s government-run tax preparation platform, ending a short-lived experiment that aimed to let Americans file federal returns directly with the IRS at no cost. The move marks a significant retreat from efforts to expand government involvement in tax filing and follows growing concerns about the cost, efficiency and broader implications of the program.
Launched by the Biden administration in early 2024 in 12 states and expanded to 24 the following year, Direct File was promoted as a free alternative to commercial tax-preparation services. But a Treasury review found that the initiative quickly outpaced its mandate and budget. While Congress allotted $15 million under the 2022 Inflation Reduction Act to study the concept, the IRS ultimately diverted enough internal funds to spend $114 million on the system in 2024 alone. Treasury estimates show the agency spent roughly $138 per return — far more than typical consumer tax software fees.
The decision to discontinue Direct File comes as lawmakers push broader reforms to how the IRS interacts with taxpayers. The Senate last month unanimously passed the Math Act, bipartisan legislation designed to reduce confusion around math-error notices — automated messages the IRS sends when it identifies discrepancies on a return. Under current rules, the agency recalculates a taxpayer’s bill unless the filer objects within 60 days, sometimes without clearly identifying the alleged error.
The Math Act will require the IRS to specify the type and location of mistakes and provide an itemized explanation of any recalculated tax bill. The House approved the measure in March, and the bill now awaits President Donald Trump’s signature.
Source: WSJ