IRS Launches Permanent Free Federal Tax Filing Service in 2025: Save Money and File Easily

Diccon Hyatt is a seasoned financial and economics journalist who has extensively covered the pandemic-era economy through hundreds of articles over the past two years. He excels at breaking down complex financial topics into clear, accessible language, focusing on how economic trends affect individual finances and markets. His reporting experience includes work at U.S. 1, Community News Service, and the Middletown Transcript.

Highlights to Know

• The IRS is making the Direct File program permanent, enabling taxpayers to submit federal tax returns directly to the government without third-party intermediaries.
  
• Originally piloted in 12 states with limited tax scenarios, the program will expand nationwide and broaden its coverage to include more common tax situations starting in the 2024 tax season.
  
• User feedback has been overwhelmingly positive, although private tax filing companies have expressed opposition, citing competitive concerns.
  
  

The IRS and Treasury Department announced on Thursday that the Direct File program, initially trialed this year, will now be a permanent fixture in the U.S. tax filing process. The pilot launched in 12 states during the previous tax season, and the IRS plans to extend the program to additional states that opt in, with expanded features to accommodate a wider range of tax returns starting next year.

Nearly 141,000 taxpayers used the new service during its pilot phase, providing favorable feedback according to IRS surveys. Before this innovation, taxpayers filing online were dependent on private tax preparation companies, which often charged fees despite some free options under the IRS’s Free File program. In 2022, IRS data shows the average taxpayer paid approximately $240 for tax preparation services.

Funded by the Inflation Reduction Act, Offering Significant Savings

This innovative tax filing service was funded by the Inflation Reduction Act of 2022, with an investment of $31.8 million. Collectively, users saved an estimated $5.6 million in filing fees by utilizing the free Direct File option.

Treasury Secretary Janet Yellen emphasized the importance of accessible tax filing: “Fulfilling your tax responsibilities and claiming eligible credits should be straightforward. The IRS has faced chronic underfunding for decades, leaving taxpayers underserved. Thanks to the Inflation Reduction Act, we are finally transforming this reality.”

While the exact number of states joining and new features debuting next tax season remain unspecified, the IRS is committed to broadening the program’s reach and capabilities beyond the initial limited rollout.

Private Tax Software Companies Push Back

Despite positive user experiences praising ease of use, the Direct File program has met resistance from private tax preparation firms who view it as a competitive threat.

Intuit, creator of TurboTax, issued a statement last month criticizing the program’s limited reach—citing that it had engaged only seven out of every 1,000 eligible taxpayers—and expressing concerns over its market impact. Following the announcement, Intuit’s stock experienced a further dip amid ongoing market volatility.

The IRS reassured taxpayers that it would continue supporting multiple tax filing options, including private software and professional services.

“Many taxpayers prefer working with trusted tax professionals or commercial software, free or paid,” said IRS Commissioner Danny Werfel. “We will maintain support for all filing avenues to best serve the public.”

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