IRS Discontinues Free Tax Filing Program

The Internal Revenue Service informed Oregon and other states on Monday about the discontinuation of the federal free tax filing initiative known as IRS Direct File. This program enabled millions of Americans to submit their federal tax returns online without cost, particularly around the April 15 deadline.

As news began circulating about the cancellations of this Biden-era program on Tuesday and Wednesday, some Democratic lawmakers placed the blame on the previous Trump administration.

Oregon Senator Ron Wyden expressed concerns on Wednesday, suggesting that this decision would negatively impact everyday Americans while benefiting private companies that charge for e-filing software.

Wyden remarked, “The Trump administration is targeting essential public services that help citizens save both time and money. The only outcome from this is that working-class taxpayers will see their funds inflate the profits of large tax software firms.”

Senator Elizabeth Warren from Massachusetts chimed in, asserting that filing taxes “should be free and easy,” and promised to continue advocating for such measures.

Warren added, “Thanks to Donald Trump, Americans are now forced to invest more time and money into their tax filings while large tax prep companies are celebrating.”

According to data from the U.S. Treasury, taxpayers typically spend about 13 hours and $270 preparing their annual tax returns. The IRS’s Direct File program enjoyed high approval, with a significant majority rating it as above average or excellent.

The IRS kicked off IRS Direct File on a trial basis for the 2023 tax year, allowing users from certain states (excluding Oregon) to file in early 2024. In fact, residents of Oregon had the opportunity to use IRS Direct File for the first time earlier this year.

This week, the IRS announced plans to phase out the free filing program starting in early 2026, impacting the tax filings for the 2025 tax year. A brief email from the IRS didn’t clarify the authority behind this decision, leaving many questions unanswered, according to a spokesperson for Wyden’s office.

On Wednesday, neither the IRS nor the Treasury Department responded to inquiries for comment.

However, Oregon taxpayers will still have the option to e-file their state taxes for free through a program in Oregon, which approximately 14,000 residents used for their personal income taxes this year. Robin Maxey, a spokeswoman for the Oregon Department of Revenue, noted that the state had previously linked its service to IRS Direct File, but anticipates an increase in usage.

Maxey mentioned that around 4,700 Oregon taxpayers utilized IRS Direct File for their federal filings, which is just a small fraction of the estimated 650,000 eligible residents.

Wyden suggested, “Considering that numerous Oregonians took advantage of the free Direct File service in its initial year, it’s reasonable to expect that usage will rise in future years. Unfortunately, Donald Trump’s actions have stifled the prospects for taxpayers looking to save money by choosing less costly options over costly tax software.”

In contrast, some Republican lawmakers argued that the current IRS Direct File system wastes taxpayer money, citing the presence of other free filing programs. Yet, the variety of options can complicate the decision-making process for taxpayers, as many programs come with income limits or restrictions. Critics also pointed out that private companies often upsell users to more expensive versions of their services.

Notably, Elon Musk, who led the Department of Government Efficiency, also strongly advocated for cutting the IRS’s free filing system.