IRS Direct File Program Elimination | What You Should Know

December, 19 2025 by Veselina Arangelova, EA

The One Big Beautiful Bill Act of 2025, also referred to as the OBBB or BBB, introduced sweeping changes to the already complicated Tax Code. Some of these changes have nothing to do with actual statutes, credits or deductions, but instead are regarding access to tools and means of filing your tax return as required by law.

Up until today, taxpayers had several options when handling their tax filing come January. Some of these options included either Free File from approved providers or, if living in an eligible state, Direct File to handle their return. (While the names are similar, these are two different options, so it is important to keep that in mind.) Of course, there is also the option of using tax preparation software or a tax preparer to assist with the filing of your tax return.

In this blog, we will be discussing the Free File and Direct File options targeted by the Bill, so you understand the differences and what changes are on the horizon.

What is the IRS Free File Program?

I will start with the Free File program, which has been well established and in place for more than twenty years. Before the Direct File program was introduced, Free File was the only IRS initiative for free self-prepared tax filing.

Free File is a multi-year agreement between the IRS and the Free File Alliance, a public-private partnership designed to improve government electronic services. The annual IRS Free File program is the result of this initiative.

Free File allows qualified taxpayers to prepare and file federal and state income tax returns online using guided tax preparation software. This filing option is available to taxpayers who qualify based on their Adjusted Gross Income ($84,000 or less in 2024), which is annually adjusted for inflation.

This threshold number is not chosen at random; rather it is meant to represent the income level that describes at least 70% of eligible taxpayers that must file a tax return. One can say that an effort is made to cover as many American taxpayers as possible under this free program.

If you are a qualifying taxpayer, you can choose to prepare your return with one of the 8 trusted partners that currently participate in the Free File Alliance. However, it is important to keep in mind that the IRS doesn’t endorse any provider, and it is still your responsibility to determine if you are eligible under the conditions of the specific participant.

In a nutshell, Free File allows qualified taxpayers to:

File federal and state returns
Use an otherwise paid product for free from an approved provider

Now, let’s discuss the Direct File program, which is different from the Free File program in a few ways.

What is the IRS Direct File Program?

The Direct File program was piloted to eligible taxpayers in 12 different states filing 2023 returns. For the next filing season, it was expanded to include a total of 25 states. Eligible taxpayers could file using Direct File if they met the program qualifications, and the return was simple enough to be handled by the tool. This way, a qualified taxpayer could file a return directly with the government through the platform and not use one of the existing partners in the Alliance.

The IRS Direct File allows taxpayers to:

File their federal return directly with the IRS.
File free even if they have more than $84,000 in income (as opposed to Free File).
- More information on income limits can be found here.
File simple returns, with specific income types, limited credits, and only using the standard deduction.
- More information on the specific income types and credits can be found here.

Under the Direct File program, state returns are to be handled separately with specific tools (such as websites or fillable forms) particular to each state. In some cases, the federal and state tools were linked with the goal of providing a seamless experience for taxpayers.

How does the Big Beautiful Bill affect these filing programs?

Prior to the passing of the Big Beautiful Bill, the IRS planned to expand the Direct File program to additional states. But this will soon change. To determine the fate of Direct File, the government budgeted $15,000,000 for the Department of the Treasury to deliver to Congress a report that answers the following questions:

How much it would cost to 1) continue enhancing and further establishing public-private partnerships to provide free tax filing for up to 70% of qualifying taxpayers, based on adjusted gross income, and 2) replace any direct e-filing programs run by the IRS or
How much it would cost to develop and run a free direct e-file tax return system, including any costs to build and administer each release.

The report should also include taxpayers' opinions and preferences regarding a taxpayer-funded, government-run service versus a free service provided by the private sector.

It was a mystery what would happen to the Direct File until the Department of the Treasury released the requested report to Congress in early November.

According to the report, Direct File had an overall low taxpayer participation in 2023 and 2024 compared to other free filing options. Despite being free to taxpayers, it was running at a relatively high cost to the government. Given the challenges, the IRS will suspend the Direct File program and refocus on strengthening its existing partnerships, while continuing to modernize and promote taxpayer awareness of Free File.

The new tax season is almost here, so it is important to understand what options you have before you start your tax preparation. If you previously relied on Direct File, this may not be an option. You can check if you qualify for Free File instead or research other paid providers.

The IRS keeps a news page related to the One, Big, Beautiful Bill provisions, and any changes to the tax filing programs will likely be announced there when the time comes. If you are interested in keeping up with the developments, you can keep an eye on it there.