The Internal Revenue Service (IRS) has officially announced the discontinuation of its Direct File pilot program for the 2026 tax season, marking the permanent end of a free digital platform that allowed taxpayers to file their federal tax returns directly with the agency.
This decision comes after IRS Commissioner Billy Long’s statements and is a major shift from the initial goal of establishing Direct File as a permanent service starting in 2025.
Reasons for the Discontinuation of Direct File
While the Direct File service enjoyed success during its pilot phase in 2024, it ultimately faced high operating costs, potential hidden fees, and confusion among some users.
Despite receiving positive feedback (with user satisfaction ratings of 90%-94%), the decision was made to cancel the program due to its operational challenges. The administration determined that the long-term viability of the service was not sustainable, especially given the cost concerns.
Impact on Low-Budget Tax Filing
The elimination of Direct File presents significant challenges for low-income households and moderate-income taxpayers, many of whom relied on the free platform to file their taxes without incurring additional costs.
Direct File not only removed the financial barrier but also simplified the tax filing process, allowing many taxpayers to easily claim important deductions and credits like the Earned Income Tax Credit (EITC).
With Direct File no longer an option, taxpayers will need to seek out other filing alternatives—many of which come with a financial cost. Commercial tax software providers such as TurboTax and H&R Block charge anywhere from $100 to $200 for a basic federal return, an expense that was previously avoided through Direct File.
Additionally, the time spent preparing and filing taxes is expected to increase. It is estimated that using Direct File helped reduce preparation time significantly compared to traditional methods or basic commercial software, which could take about 9 hours on average.
Free Filing Alternatives Available to Taxpayers
Despite the loss of Direct File, several free alternatives are still available for low-income and moderate-income taxpayers. Here are some of the best options:
IRS Free File:
Available for taxpayers with an AGI of $84,000 or less in 2025.
This service allows taxpayers to use free versions of software from participating companies in the Free File Alliance.
There is also the option of Free File Fillable Forms, which provides an electronic means of filing for those who prefer to manually complete their returns. There is no income limit for this option.
VITA (Volunteer Income Tax Assistance) and TCE (Tax Counseling for the Elderly):
These programs provide free in-person assistance from IRS-certified volunteers.
They are designed for people with incomes of $67,000 or less, seniors over 60, people with disabilities, or those with limited English proficiency.
Volunteers help identify available tax credits, ensuring taxpayers maximize their refunds.
MilTax:
Active-duty U.S. Armed Forces members and qualified veterans have access to MilTax, a free service administered by the Department of Defense.
MilTax provides free electronic tax preparation and filing for federal and up to three state returns, with no income restrictions. This service is tailored for the military community.
Other Free Tax Filing Software
Beyond IRS offerings, there are several commercial tax software platforms that offer free versions for federal filings. Some notable options include:
Cash App Taxes: Promoted as completely free for both federal and state taxes.
FreeTaxUSA: Known as the most comprehensive free option for federal taxes, with a $14.99 charge for state taxes.
H&R Block Free Online: Offers a free option for federal tax filing, with state coverage varying.
MyFreeTaxes: Another free option, though terms and state coverage may differ.
The discontinuation of Direct File creates new challenges for taxpayers, particularly for low-income families who previously benefited from the simplicity and free nature of the program.
However, alternative free filing options such as IRS Free File, VITA, and MilTax, along with external software options, provide ways for taxpayers to continue filing their taxes without incurring high costs.
While the loss of Direct File is a setback, these alternatives ensure that tax filing remains accessible to a wide range of Americans, especially those in need of financial assistance.
