Created through the Inflation Reduction Act, IRS Direct File was used in 25 states last tax season but will not return in 2026. Critics of the cancellation also note major tax preparation companies have opposed such programs for years.
Photo: Nataliya Vaitkevich/PEXELS
by Zamone PerezPublic News Service
WASHINGTON, DC - The Trump administration has announced it will cancel the IRS Direct File program for the 2026 tax filing season, a move which will result in many Americans spending more time and money to file their taxes. Last tax season, 25 states opted into Direct File after it was created by President Joe Biden’s Inflation Reduction Act in 2024. While Virginia did not enroll in the program the past two years, financial policy advocates find tax filers in the Commonwealth would have saved $500 million annually if the state did participate. Adam Ruben, vice president of the Economic Security Project, said Direct File was valuable because tax filing software is often challenging for those who don't speak English, and cost-prohibitive for those with low income. "The average taxpayer spends $160 and nine hours filling out their tax return," Ruben pointed out. "That’s just prohibitive for a lot of low-income families. Part of the value of Direct File would be to make tax filing simple and free, so that people don’t have to have money in their pocket in order to go out and claim those tax credits that they earn." Trump administration officials have defended the move, claiming better free options exist for low-income filers, and private companies can do a better job for those who can pay. One survey found nearly 75% of people who used Direct File would recommend the service to others over other tax filing options. Ruben rejected the argument Direct File costs too much to implement, highlighting how the system cut down on customer service costs and saves tax filers money. "You’ll hear the opponents of Direct File complain about what it cost to build," Ruben observed. "But somehow, you never hear them talk about all the money that it saves for either taxpayers or for the federal government." Direct File was also unpopular with large tax filing companies, which one analysis found spent nearly $40 million since 2006 to lobby against similar programs.
This story was produced with original reporting from Josh Israel for The Virginia Independent.
