Democrats introduce bill to restore IRS Direct File program

By Thérèse Boudreaux
The Center Square

A group of U.S. lawmakers introduced legislation Thursday to codify the IRS Direct File program, which the Trump administration shut down in 2025.

The Direct File Act, supported by 150 Democrats across the House and Senate, would reinstate the shuttered service, which gave taxpayers the option to electronically file their federal tax returns directly with the IRS at no cost.

“Americans shouldn’t have to waste valuable time or hard-earned money just to file their taxes,” Rep. Brad Sherman, D-Calif., a supporter of the bill, said. “The Direct File Act expands on the successful 2024 pilot and offers a straightforward, no-cost filing option that will make the process simpler and more affordable for working families.”

According to the U.S. Treasury department, nonbusiness taxpayers spend an estimated average of about 8 hours and $160 on filing tax returns, while business taxpayers spend an average of 21 hours and $610.

A report authored by the Economic Security Project estimated that individual taxpayers could save up to $23 billion annually if the Direct File program were fully implemented.

But while it operated, the program cost taxpayers overall much more than the IRS’s original cost projections, one of the reasons the Treasury cited as a reason for the program’s suspension.

The IRS had estimated the federal government would spend about $9 to $16 dollars per return filed through Direct File. The actual cost amounted to roughly $138 per return in tax year 2024, even though less than 1% of taxpayers used the program.

“Direct File had low overall participation and relatively high costs and burdens on the federal government, compared to other free filing options,” the department reported. “For tax year 2024, returns submitted using Direct File constituted less than 0.5 percent of the approximately 146 million returns filed. Direct File had a cost to the federal budget of at least $41 million for tax year 2024 returns, or a cost of at least $138 per return accepted through Direct File.”

The report also noted that the topline number likely “understates the true costs of developing, administering, and supporting Direct File for tax year 2024,” and that the “complexity and technical demands also diverted IRS resources from other core priorities.”

Democrats’ Direct File Act would not only reinstate the Direct File Program but also implement other changes, including effectively prohibiting the IRS from restricting free online tax preparation services in the future.

The bill is unlikely to pass either chamber of Congress due to Republican opposition to the program.