Republicans in Congress have big plans for the “one big, beautiful bill,” which will affect not only tax rates and exemptions but also how people file their taxes.
The GOP was irked last year by an Internal Revenue Service announcement that it would make Direct File permanent. The service launched last year is designed to help people file without having to shell out cash to H&R Block or another tax prep firm, but opponents describe it as another form of government overreach.
“Under the guise of offering a convenient ‘free-to-file’ alternative preparation service, the IRS asserts itself as the tax assessor, collector, preparer, and enforcer—all in one—when the program is used,” reads a letter that 29 House Republicans sent to President Donald Trump last December.
The letter called for a Day One executive order scrapping Direct File. While that didn’t pass, the Trump-backed reconciliation bill aims to do the same through legislation.
Direct File is a Biden administration initiative that was offered in 12 states in 2024 and 25 states this year. Roughly 140,000 filers used it last year, while figures are not yet available for this year.
Following the initial rollout, the IRS announced last May that Direct File would become permanent, again drawing the ire of Republicans.
“We write with serious concerns regarding your agency’s recent unilateral and unauthorized
action to create a permanent IRS Direct File tax preparation program,” a letter from 19 Republican senators read. “This program was not authorized by Congress and is a massive and ill-advised expansion of the power of the IRS.”
The agency did not respond to a request for comment from the Washington Examiner.
Though the “big, beautiful” reconciliation bill is imperiled at the moment, if passed, it could replace Direct File with a system that proponents say more people would use — one that includes private industry.
A provision on pages 370 and 371 of the bill calls for allocating $15 million to the Treasury Department for a public-private partnership to provide free tax filing for up to 70% of all taxpayers.
While such a system would align with the original goal of Direct File, Democrats say the GOP has another motive for involving private industry.
An analysis from nonprofit advocacy organization Public Citizen found that Republicans leading the charge against Direct File received $1.8 million in lifetime contributions from opponents of the service.
Namely, tax preparation firms H&R Block and Intuit, along with industry group American Coalition for Taxpayer Rights, donated to multiple Republicans now going after Direct File, which opponents say is part of an effort to protect their business model.
More than 100 Democratic senators and representatives wrote a letter in January arguing in favor of Direct File. They said the service is efficient and effective, and more than 90% of survey respondents reported favorable experiences using it.
The letter said that filers pay an average of $160 to file their taxes, money that Direct File saves.
ACTR, however, says Direct File has not been a success or an overall benefit to taxpayers.
“ACTR strongly supports the termination of the IRS Direct File project, which is unnecessary, costly, and unauthorized by Congress,” the group said in a statement. “The take-up rate of IRS Direct File by taxpayers has been abysmal, even as the private sector provides millions of tax returns each year at no cost to taxpayers.”
Tania Mercado, a spokeswoman for Intuit, made a similar statement.
“The Direct File program is wholly unnecessary, unauthorized, a waste of taxpayer dollars, and not in the best interest of taxpayers,” she said. “Free tax preparation has been available to every American taxpayer for years, well before Direct File at zero cost to the taxpayer and zero cost to the government.”
While 423,450 taxpayers logged into Direct File last year, only 140,803 submitted accepted returns using the service, the Associated Press reported in April.
Tech titan and Trump backer Elon Musk took aim at Direct File’s development team earlier this year, posting on X that he had “deleted” 18F, the government agency that worked on the project. But Democrats insist that middle-class taxpayers will be harmed.
“Americans want a free, easy way to file their taxes,” Sen. Elizabeth Warren (D-MA) said. “Trump and Musk want to take it away.”
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The fate of Direct File is now tied to the fate of the reconciliation bill, and proponents are holding out hope that the Trump administration will convince Congress to keep it.
“President Trump ran on lowering costs and making government more efficient and responsive to people,” the Economic Security Project’s Adam Ruben said. “Direct File delivers on its promise, and the administration’s decision to end the program would show their loyalty to big corporations and the wealthy at the expense of American families.”
