Trump’s Treasury pick pledges to keep IRS Direct File open this tax season

Billionaire hedge fund manager Scott Bessent testifies before the Senate Finance Committee during his confirmation hearing for Treasury Secretary in the Dirksen Senate Office Building on Capitol Hill on January 16, 2025 in Washington, DC.

Billionaire hedge fund manager Scott Bessent testifies before the Senate Finance Committee during his confirmation hearing for Treasury Secretary in the Dirksen Senate Office Building on Capitol Hill on January 16, 2025 in Washington, DC. Chip Somodevilla/Getty Images

Scott Bessent, Trump’s pick for Treasury Secretary, said that he would have to study the long-term future of the tool. Republicans on Capitol Hill, however, have panned Direct File.

Scott Bessent, the hedge fund executive picked by President-elect Donald Trump to serve as Treasury Secretary, committed to keeping the IRS Direct File open for the coming tax season but did not elaborate on its long-term future, noting that he’ll want to “study the program” if confirmed.

The online IRS free tax filing service is set to open in 25 states a week after Trump’s inauguration. Some Republicans have asked Trump to gut the service, and tax prep companies accelerated their lobbying efforts as the IRS built and then launched Direct File as a pilot last tax season, according to reporting by Open Secrets. 

“I will commit that for this tax season … Direct File will be operative,” Bessent said when asked about the program’s future during his confirmation hearing before the Senate Finance Committee on Thursday. “If confirmed, I will consult and study the program and understand it better and make sure that it works to serve the IRS’ three goals of collections, customer service and privacy.”

“I appreciate the answer,” said Sen. Ron Wyden, D-Ore., the Finance panel's top Democrat. Yesterday, he and over 130 other Democrats penned a letter to Bessent and the IRS commissioner-designate, Billy Long, asking them to keep and expand the program.

“It’s absurd that Americans get charged huge amounts of money to file their taxes every year,” Wyden said, adding that Direct File is “a free option that allows taxpayers to file their returns directly to the IRS — no software middleman picking their pockets or harvesting their data.”

Almost 30 House Republicans have asked Trump to kill Direct File on day one, calling it “a threat to taxpayers’ freedom from government overreach.” At the same time, Trump’s advisory Department of Government Efficiency is reportedly mulling the creation of a new IRS mobile app for Americans to file their taxes.

The committee’s chairman, Sen. Mike Crapo, R-Idaho, called Bessent an “excellent choice” for the top Treasury role, though he did not mention the tax program in his opening remarks or initial questions. 

Previously, Crapo had called the program “redundant,” saying that “it is time to end Direct File.”

He and Sen. John Barrasso, R-Wyo., have also questioned the IRS’ legal ground for the program, saying that it's not directly authorized by Congress. Current IRS Commissioner Danny Werfel has said that the IRS has the authority to offer taxpayers different options for tax filing.

The IRS piloted the Direct File tool last tax season after fielding a study on it as directed by Democrats’ 2022 Inflation Reduction Act. 

It marked a change from decades of the IRS relying on a deal with tax prep companies for them to offer most Americans free filing options in exchange for the IRS not acting as a competitor, although that clause was removed in recent years. That program, called Free File, has been vastly underutilized, and the IRS has characterized Direct File as an additional option, not a replacement.

Those that use the Direct File system to file their taxes this year can opt to have some of their information prepopulated in the tool, a new feature announced by the IRS last week. Only taxpayers in 25 states, however, will be able to use Direct File, which is also limited to simple tax situations. For those with state income taxes, the system connects users to state systems to finish filing.

Last year, the pilot saved Americans an estimated $5.6 million in tax prep fees on their federal returns, according to the IRS. The tax agency has also touted positive marks from the nearly 141,000 people that used Direct File.

Wyden told Nextgov/FCW that the one-year commitment for Direct File is a “big plus … because if you have another good year where people see that this is something that’s really helpful to them, that means we’re in a better position for the future,” but added that “I’m not underestimating the power of the tax prep firms.”

“I know that the big tax prep companies are continuing to try to kill this,” he said.

If the tool does stay online past this tax season, continued funding will likely be key to ensuring it doesn’t become obsolete. Under Biden, the IRS has been urging lawmakers not to pull more funding from the agency.