In October 2025, the U.S. Treasury reported to Congress that it had suspended the Direct File program for individual income tax returns, which expanded from 12 to 25 states, due to low participation and higher costs than other free filing options.
The US Department of the Treasury issued a report to Congress in October 2025 regarding the replacement of the Direct File program for individual income tax returns. Initially launched during the 2024 tax filing season in 12 states, the program expanded to 25 states in the 2025 filing season.
The Treasury Department has suspended Direct File due to low participation and high costs compared to other free filing options.
Section I: Executive Summary
American taxpayers have access to several options for free income tax return preparation and filing, including longstanding public-private partnerships and in-person volunteer programs.
Under the prior Administration, the Internal Revenue Service (IRS) created an option for eligible taxpayers to file their federal individual income tax return online directly with the IRS at no direct cost to the user.
First launched as a pilot program for tax year 2023, Direct File was available to taxpayers in 12 states. At the conclusion of the pilot program, a total of 140,803 returns had been filed by users and accepted by the IRS.
For tax year 2024, Direct File was available to taxpayers in 25 states. As of April 20, 2025, a total of 296,531 returns had been filed by users and accepted by the IRS.
Direct File had low overall participation and relatively high costs and burdens on the federal government, compared to other free filing options.
For tax year 2024, returns submitted using Direct File constituted less than 0.5% of the approximately 146 million returns filed. Direct File had a cost to the federal budget of at least USD 41 million for tax year 2024 returns, or a cost of at least USD 138 per return accepted through Direct File.3 Because not all agency support functions were included in the cost of Direct File, the USD 41 million understates the true costs of developing, administering, and supporting Direct File for tax year 2024. Direct File’s complexity and technical demands also diverted IRS resources from other core priorities.
Meanwhile, successful, longstanding programs, such as Free File (which already covers a broader eligibility population than Direct File and operates at little cost to the government), were not fully promoted or optimised during this period. Congress directed in section 70607 of the One, Big, Beautiful Bill Act (“OBBBA”) (Public Law 119-21) the Department of the Treasury (Treasury) to report on (1) the costs of enhancing publicprivate partnerships that provide tax free filing for up to 70% of all taxpayers and to replace any direct e-file programs run by the IRS; (2) taxpayer opinions and preferences regarding a taxpayer-funded, government-run service or a free service provided by the privatesector; (3) an assessment of the feasibility of a new approach, how to make the options consistent and simple for taxpayers across all participating providers, and how to provide features to address taxpayer needs; and (4) the costs of building and operating a free government-run direct e-file system, including options for differential coverage based on taxpayer income and return complexity. This report is submitted pursuant to this statutory requirement.
The report reviews all major free filing options available for tax year 2024, including the Volunteer Income Tax Assistance (VITA) program, Tax Counseling for the Elderly (TCE), Free File, Free File Fillable Forms, Direct File, and commercial providers’ free products, and addresses the extent to which these programs also provide support for filing state income tax returns.
The report incorporates certain survey data on taxpayer preferences and behaviour, highlighting both the continued interest in free filing options and the persistent lack of awareness of existing options. The report announces that the IRS will suspend Direct File. The report recommends refocusing IRS efforts on strengthening existing free filing programs, particularly Free File, while engaging stakeholders to modernise and promote awareness of Free File.
The report announces that the Treasury and the IRS will take the following actions:
- Conduct an updated taxpayer survey on preferences over different filing options that addresses methodological and other challenges present in earlier surveys.
- Convene a Free Filing Modernisation Summit
- Create a common understanding of a “free return” across all filing options available to taxpayers;
- Collect more robust usage data from software providers; and
- Develop a supplemental report to Congress, including updates based on the actions listed above.
This path forward aims to increase awareness of and access to free filing services in a cost-effective way that better serves taxpayers’ interests without imposing unsustainable burdens on the government.
Section II: Overview of Free Tax Preparation and Filing Programs
American taxpayers have access to a range of free income tax preparation and filing options delivered by the private sector, the IRS, and longstanding public-private partnerships. These services differ in delivery method—from in-person assistance to guided online do-it-yourself tools—and in eligibility, scope, and availability of state return preparation.
This section summarises how taxpayers prepared and filed their federal returns for tax year 2024 and provides an overview of the major free filing programs operated by, or in partnership with, the IRS: the VITA program, the TCE program, Free File, Free File Fillable Forms (FFFF), and Direct File.
