A new proposal in the U.S. Senate could change the way millions of Americans file their taxes—and not in a good way. If you rely on free programs like IRS Direct File or Free File, you may soon have fewer options to file your taxes without paying out of pocket. The Senate is pushing to end the IRS’s free filing systems, and the decision could come as early as July 4.
What is the IRS Direct File program?
If you are not familiar with it, IRS Direct File is a fairly new online tool that lets people file simple tax returns directly with the IRS—completely free and without needing to go through companies like TurboTax or H and R Block.
- It launched in 2024 after a small test in 12 states for the 2023 tax season.
- By 2025, it had expanded to 25 states.
- About 30 million taxpayers were eligible to use it this year.
- More than 3.3 million people used the program’s eligibility checker.
The idea was to help folks with simple tax situations file their returns without dealing with third-party fees or upsells.
What does the Senate bill propose?
The Senate Committee on Finance has introduced changes to the One Big Beautiful Bill Act that include a plan to shut down both IRS Direct File and the older Free File program.
Here is what the proposal aims to do:
- Terminate the current IRS Direct File program.
- Review and possibly replace both programs with a public-private partnership between the IRS and private tax prep companies.
- Investigate alternative systems that would involve tax software providers, not the IRS, offering “free” filing services.
In short, instead of having a free, government-run tool like Direct File, you might only have access to “free” options provided by companies that may try to upsell you or limit their services.
Why is this change being proposed?
Some Republicans argue that these IRS-run services are unnecessary and waste taxpayer money. Tania Mercado, a spokesperson for TurboTax’s parent company Intuit, said:
“Direct File is not free tax preparation, but rather a thinly veiled scheme where billions of taxpayer dollars will be unnecessarily used to pay for something already completely free of charge today.”
They believe that private companies already offer free filing options, so there is no need for the government to step in.
What are Democrats and supporters saying?
Not everyone agrees with the plan. In fact, around 200 Democratic lawmakers sent a letter in April to Treasury Secretary Scott Bessent asking that Direct File be kept in place for 2025 and beyond. They wrote:
“Ending this free, easy-to-use, and popular program would be an insult to American taxpayers.”
They argue that relying solely on private tax companies often leads to confusion, unexpected costs, and hidden fees.
Who would be most affected if Direct File ends?
This move would mostly impact lower- and middle-income Americans who:
- Earn under $84,000 a year (the limit for Free File).
- Have simple tax returns and want to avoid using paid tax prep services.
- Live in the 25 states where Direct File was already available.
If this change goes through, many of these individuals may have no choice but to pay for tax prep help, even when their returns are basic.
When will the Senate vote on this change?
Lawmakers are hoping to pass the final version of the bill by July 4, 2025. That means we could know very soon whether these free filing options will stay or go.
Once the Senate votes, the bill would head back to the House for final approval before being signed into law by the president. Until then, nothing is final—but the window for action is closing fast.
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