Republican lawmakers ask Trump to kill IRS Direct File

Nearly 30 House Republicans are asking President-elect Donald Trump to stop the IRS free tax filing service, Direct File, on day one of his new administration. 

Reps. Adrian Smith, R-Neb., and Chuck Edwards, R-N.C., led the group in penning a letter to Trump on Tuesday, writing that “the program’s creation and ongoing expansion pose a threat to taxpayers’ freedom from government overreach, and its rollout and structural flaws have already come at a steep price.”

Direct File is an online IRS service for people to file federal tax returns for free directly with the tax agency. The IRS piloted the program earlier this year and announced in May that it would be a permanent option for taxpayers, citing positive marks on the tool from the over 140,000 taxpayers who used it to file their taxes. 

It’s set to open to eligible taxpayers in 24 states when the upcoming filing season opens, likely putting its debut close to the start of the new administration, as the filing season historically opens in January and February and the inauguration is scheduled for Jan. 20. 

Republicans have already tried to cancel the service with bills to prohibit the IRS from continuing its efforts and to block Direct File’s funding. At the same time, billionaire Elon Musk and former presidential candidate Vivek Ramaswamy are reportedly mulling the potential of an IRS tax filing app as part of their advisory work under Trump, although what will happen there isn’t clear.

Trump himself has signaled a new direction for the tax agency by suggesting he will oust current IRS Commissioner Danny Werfel before his term ends in 2027 and replace him with former Rep. Billy Long, R-Mo.

The House Republicans assert that the IRS running Direct File is a “clear conflict of interest” and that “the IRS has little incentive to ensure hardworking Americans do not pay more than they owe in taxes.”

The IRS is bound by the tax laws set by Congress. The tax agency did not respond to a request for comment.

“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,” the letter states, asking Trump take action “including but not limited to a day-one executive order” to end the program.

The tax agency isn’t really operating as a tax preparer with the tool, said James McTigue, Jr., director of strategic issues for tax policy and administration at the Government Accountability Office, which has fielded a report on the program.

“The IRS Direct File system allows the taxpayer to prepare his or her own return through a series of questions that are derived from the tax code,” he said. “Ultimately it is the taxpayer who is preparing the tax return.”

The IRS decision to field the tool earlier this year was a marked change from the status quo.

Since the early 2000s, the government had relied on a partnership with commercial tax prep companies to offer most Americans a free tax filing option under the condition that the IRS wouldn’t make its own tool and compete with the tax prep industry, a clause that was removed in 2019. 

That program, though, is vastly underused, with only 3% of those eligible using it from 2020 to 2024, according to a Treasury Department watchdog. Millions of Americans pay fees to file their tax returns with software provided by the same companies that were or are part of the program, called Free File. 

In 2022, Intuit entered a settlement for pushing Americans toward paid TurboTax products even when they were eligible for free ones. Intuit is no longer part of the program, nor is heavy-hitter H&R Block. Both companies have previously described Direct File as a “solution in search of a problem” in comments to Nextgov/FCW. 

Intuit has also come under scrutiny from the Federal Trade Commission for what the FTC called deceptive advertising of free tax filing products that millions of consumers couldn’t use.

Trump’s pick for the IRS backed bills to require the Treasury to continue the Free File program while he was in Congress. The Trump transition team didn’t immediately respond to a question from Nextgov/FCW of whether the incoming White House would cancel the service. 

The IRS has said that Direct File won’t replace Free File but instead be an additional option for taxpayers. 

The creation of Direct File put the IRS in line with other countries worldwide that offer similar tools, the former National Taxpayer Advocate Nina Olson previously told Nextgov/FCW. 

Intuit has long lobbied against a government-run system, as ProPublica has documented. It set a new record for itself in lobbying dollars in 2023, according to Open Secrets. Other tax prep companies and trade associations also increased lobbying spend that year.

Supporters of Direct File say that it saves Americans time and money in tax filing. People spend 13 hours and $270 on filing taxes annually on average, although that varies for individuals, the IRS estimated last year. 

That burden means that some people don’t file their taxes and miss out on benefits that are delivered through the tax code, like the Earned Income Tax Credit. Over 9 million people didn’t file returns to get benefits in the 2022 cycle, according to the IRS.

“Direct File is a common-sense digital government service for the 21st century, which would reduce administrative burden for low-income families, and allow them to get their information directly from their government — rather than from private intermediaries who do not have their best interests at heart,” the Coalition for Fair and Free Filing, made up of over 200 organizations, wrote to the IRS in 2023.

The House Republicans, meanwhile, write that the Direct File program wasn’t specifically authorized by lawmakers, calling it “a blatant overstep of constitutional authority,” an argument some Republican state attorneys general have also made. 

Werfel told lawmakers earlier this year that the IRS has “a responsibility and an authority to offer taxpayers different approaches for how to meet their tax obligation” when asked about that point earlier this year, noting that not every tool that the IRS offers for taxpayers to meet their obligations is specifically spelled out in law.

The group behind the letter also call the program wasteful and inefficient, saying that it “is not an efficient use of government resources, especially when the private sector offers better tax preparation services at no cost.”

The IRS should promote Free File instead, the Republicans write. The total cost for the Direct File was just over $31 million.

Direct File hasn’t been without its challenges since Democrats included an ask for a report on the feasibility of such a system in their 2022 Inflation Reduction Act. 

Direct File doesn’t help people file state taxes, for example, and the tool routes those in states with such taxes to state-side tools to finish out their filing.

The IRS also didn’t fully open Direct File until well into the tax season earlier this year, and the impact of identity proofing requirements on those using the tool is also an open question probed even by Democrats on Capitol Hill that support the tool.

Prepopulation, or the IRS pre-filling Direct File with information it already has, is a tricky subject, too, with some eager to see it used and others wary of its privacy implications. 

Werfel called the IRS vision for tax administration nonpartisan when asked about the potential impact of the election earlier this year.

“We also think that it is nonpartisan that taxpayers should have options for how they file and that the broader the menu of options, the better,” he said.

Even if Direct File survives, the IRS will need multi-year funding to keep the program from becoming obsolete. Republicans have tried to slash the billions the IRS got via the Inflation Reduction Act.