Report on the Replacement of Direct File - Section 70607 of Public Law No. 119-21

Sep 19, 2026

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Report prepared for the U.S. Department of the Treasury evaluates alternatives to IRS Direct File as required by Section 70607 of Public Law No. 119-21. It reviews free tax preparation and filing options for individual taxpayers, compares program approaches and taxpayer preferences, and analyzes costs to develop and run a free direct e-file system and to establish public-private partnerships. It assesses a phased new approach including enhancing awareness of Free File, suspending Direct File, surveying filers, and defining what “free” means.

LanguageEnglish

CategoryLetters

FormatPDF

Pages30

Reading Time11 min

AccessFree to download

Executive Summary

Free tax preparation and filing options

Direct File background and performance

Overview of Free Tax Preparation and Filing Programs

Free File and volunteer programs

IRS Free File and Free File Fillable Forms

IRS Direct File and commercial products

Comparison of Programs

Taxpayer Opinions and Preferences

Costs

Costs for a free direct e-file system

Costs for public-private partnerships

Assessment of a New Approach

Step 1-4 and path forward

Appendices

Survey finding tables

Department of the Treasury October 2, 2025 Report on the Replacement of Direct File Report to Congress Section 70607 of Public Law No. 119-21 (the One, Big, Beautiful Bill Act or “OBBBA”) directs the Department of the Treasury to evaluate alternatives to Direct File. This report fulfills this requirement. Table of Contents Section I: Executive Summary........................................................................................................ 1 Section II: Overview of Free Tax Preparation and Filing Programs............................................... 2 Federal Income Tax Preparation Methods for Tax Year 2024 ..................................................... 3 Volunteer Income Tax Assistance Program (VITA) and Tax Counseling for the Elderly Program (TCE) ............................................................................................................................ 4 IRS Free File Program................................................................................................................. 5 Free File Fillable Forms Program ............................................................................................... 7 IRS Direct File Program .............................................................................................................. 7 Commercial Free Tax Preparation Products ................................................................................ 9 Comparison of Programs ........................................................................................................... 10 Section III: Taxpayer Opinions and Preferences........................................................................... 12 Taxpayer Interest in a Taxpayer-Funded Government-Run Service ......................................... 13 Taxpayer Interest in a Free Service Provided by the Private Sector ......................................... 13 Section IV: Costs........................................................................................................................... 14 Costs to Develop and Run a Free Direct E-File Tax Return System ........................................ 14 Costs to Establish Public-Private Partnerships for Free Tax Filing .......................................... 15 Section V: Assessment of a New Approach .................................................................................. 16 STEP 1: Enhance Awareness of Free File and Launch Public Communications Strategy ....... 16 STEP 2: Suspend the Direct File Program ................................................................................ 18 STEP 3: Conduct Survey and Engage Partners ......................................................................... 19 Conduct Survey on Taxpayer Filing Preferences and Opinions ............................................ 19 Convene Free Filing Modernization Summit ........................................................................ 19 STEP 4: Define “Free” Return, Collect Data, and Prepare Supplemental Report .................... 19 Define “Free” Return and Collect Data from Commercial Tax Software Companies .......... 19 Prepare Supplemental Report on the Future of Free Tax Filing ............................................ 19 Path Forward ............................................................................................................................. 20 Appendix A-Taxpayer Interest in a Taxpayer-Funded Government-Run Service (Survey Finding Table) ............................................................................................................................................ 21 Appendix B-Taxpayer Interest in a Free Service Provided by the Private Sector (Survey Finding Table) ............................................................................................................................................ 26 Section I: Executive Summary American t

FAQs

What requirement prompted this report, and which agency prepared it?

Section 70607 of Public Law No. 119-21 directs the Department of the Treasury to evaluate alternatives to Direct File. The Department of the Treasury prepared this report to fulfill that requirement.

How did Direct File perform compared with other free filing options?

Direct File had low overall participation and relatively high federal costs and burdens versus other free options. For tax year 2024, Direct File represented less than 0.5% of roughly 146 million returns filed.

What are the proposed steps in the new approach to replace Direct File?

The plan outlines a phased process: enhance awareness of Free File and launch communications, suspend the Direct File program, conduct surveys and engage partners, then define what a “free” return means and prepare a supplemental future-focused report.

Sep 19, 2026

Upload by Franzy