IRS Direct File reportedly ending next year

The Trump administration is reportedly making plans to shut down the Internal Revenue Service's Direct File free tax prep system next year.

The Associated Press reported Wednesday about the plans, which come amid widespread layoffs at the IRS. Elon Musk had posted on X in February that he had "deleted" 18F, a digital services team that helped build the Direct File system ahead of its initial pilot test last year. The IRS staff who had taken over development of the program were reportedly told last month to end their work on developing the system for next tax season. The U.S. Digital Service that also worked on developing Direct File has been renamed the U.S. DOGE Service after a takeover by Musk's Department of Government Efficiency. 

Senate Finance Committee ranking member Ron Wyden, D-Oregon, blamed the move on lobbying by the tax prep software industry, as well as Treasury Secretary Scott Bessent.

"No one should have to pay huge fees just to file their taxes," Wyden said in a statement Wednesday. "Direct File was a massive success, saving taxpayers millions in fees, saving them time and cutting out an unnecessary middleman that took money out of Americans' pockets for no good reason. Trump and Secretary Bessent are robbing regular American families to pay back lobbyists that spend millions to make tax filing more expensive and more difficult."

The Direct File system expanded from pilot tests in 12 states last year to 25 states this year, aided by the nonprofit group Code for America and its FileYourStateTaxes project.  A survey of over 1,000 Direct File and FileYourStateTaxes users reportedly found that 98% of respondents said they were either satisfied or very satisfied with the programs, according to the Federal News Network. Last year, then-IRS Commissioner Danny Werfel announced plans to make the Direct File program permanent, but the program has been repeatedly attacked by Republican lawmakers in Congress and the tax prep industry.

The American Coalition for Taxpayer Rights, a group representing the tax prep software industry, said it would like to see Direct File terminated. "We would urge the Administration to terminate Direct File because it's unnecessary, wasteful, unauthorized and clearly a failure," said spokesperson David Ransom. "The IRS should promote the public-private Free File partnership — which provided 10 times the number of returns as Direct File this year — and focus on taxpayer service and modernization efforts,"

Advocates criticized the move.

"Eliminating Direct File is almost literally taking money out of our pockets,"  said Susan Harley, managing director of Public Citizen's Congress Watch division, in a statement. "Trump's decision is a slap in the face to millions of hardworking people."

(Read more: "Inside Direct File: How the IRS built is free tax prep program.")