The IRS Built a Free Tax Filing Tool. Then Tax Lobbyists Killed It

October 22, 2026

For two filing seasons the IRS ran something that should not have survived contact with the tax industry: a free, government-run tax filing tool.

You answered questions. The IRS did the math. There was no fee, no upsell, no upselling a "premium" version to unlock the forms you actually needed. You filed straight with the government.

It was called Direct File, and it worked. In the 2024 pilot it handled 140,803 returns across 12 states. By the 2025 season it was live in 25 states with 32.2 million people eligible, and it accepted 296,531 returns — more than double the year before. Of the people who used it, 94% rated it Excellent or Above Average. Its Net Promoter Score hit +80.

Then, in November 2025, the IRS told all 25 states it was over.

The cost that ended it

The stated reason was money. According to the Treasury Department's own Report on the Replacement of Direct File, Direct File cost at least $41 million for the 2025 filing season.

That works out to roughly $138 for every accepted return.

Compare that to what the same filing costs commercially. The tax prep industry charges Americans about $11 billion a year, and the IRS's own Taxpayer Advocate put the average cost at about $270 per return. The free tool was less than half the price of the thing it was competing with — and it was cheaper to run than the profit margin the competitors were making on those same returns.

That is the whole story in one number. Direct File was too good, and too popular, and it was undercutting the people who had spent decades making sure you never saw it.

They did not just compete with it

The tax prep companies did not merely build a better product. They fought the free one in the places where money actually moves.

Intuit, the company behind TurboTax, paid $141 million to settle with all 50 states in 2022. The New York Attorney General's case was not about the quality of the software. It was about hiding the free option: Intuit had blocked the IRS Free File landing page from appearing in Google search results during the 2019 filing season, and had run advertisements telling people that "free" tax filing was "free, free, free" — meaning it was free for some people and not for you. Roughly 4.4 million taxpayers were part of that restitution.

A 2020 Treasury Inspector General audit found that at least 14 million Americans had paid for tax preparation they should have been entitled to do for free.

And then the lobbying. Intuit and H&R Block spent a record $7.1 million combined on federal lobbying in 2025 — the exact year the IRS killed Direct File. Combined spending since 2003 totals $103 million. The $7.1 million figure is not a rounding error against a $41 million program. It is a fifth of the program's entire annual cost, spent in a single year on influencing the decision to end it.

The program is gone, but the free path is not

Direct File is dead. The IRS published its source code in the public domain after the shutdown, and some states are now looking at building their own. Senator Elizabeth Warren has introduced the Direct File Act (S.3948), which would codify the program and void the non-compete agreements that keep the IRS from competing with private preparers. It has 40 Senate cosponsors and a House companion, H.R.7806. As of April 2026 a unanimous-consent vote to advance it was blocked by Senator Crapo.

None of that helps you right now.

What does help you right now is that the IRS Free File program still exists. Eight partner companies offer free guided filing for anyone whose 2025 adjusted gross income was $89,000 or less — up from $84,000 the year before. That covers roughly 70% of taxpayers. There is also Free File Fillable Forms, which any income level can use.

One operational note that is the difference between paying and not paying: start at IRS.gov. Type "free file" into a search engine and the sponsored results from TurboTax, H&R Block, and 1040.com will outrank the IRS's own page, because those companies bid for exactly that keyword. The IRS does not have a marketing budget to outbid them. Go to the site directly.

What this actually costs you

Direct File served 32.2 million eligible people and accepted nearly 300,000 returns in its peak season. Even after the shutdown, the tax prep industry still collects about $11 billion a year from Americans doing the same paperwork the government was already doing for free.

That is not a failure of the free market. It is a market that was protected.