The Treasury’s Report on the Replacement of Direct File was publicly released on November 5. Direct File was launched as a limited pilot program in 2024 and allowed residents in participating states to directly file tax returns through the Internal Revenue Service (IRS).

The One Big Beautiful Bill Act (OBBBA) required the IRS to present a report on Direct File to Congress by October 2. The report was required, in part, to evaluate "taxpayer opinions and preferences regarding a taxpayer-funded, government-run service or a free service provided by the private sector."

The report noted that Direct File will not be available for the 2026 filing season. During the 2024 tax filing season, over 140,000 tax returns were accepted using Direct File, and that increased to over 296,000 filed tax returns through Direct File this year.

While the report noted high taxpayer satisfaction, costs and taxpayer usage were cited as reasons for shuttering the service. Direct File accounted for less than 0.5% for individual returns and cost at least $41 million in its first year of operation, an approximate cost of $138 per return filed.

The report highlighted other free tax preparation options and filing programs available through public-private partnerships. The IRS Free File program is a public-private partnership that is intended to benefit approximately 70% of taxpayers based on the income limits for the program. This partnership allows eight companies to offer free filing services. These services can be accessed through IRS.gov/filing/irs-free-file-do-your-taxes-for-free.

In addition, the IRS operates two longstanding programs to assist taxpayers, the Volunteer Income Tax Assistance (VITA) program and Tax Counseling for the Elderly (TCE) program. Both programs use trained volunteers to assist eligible taxpayers with filing tax returns.

The IRS will move forward with resources focusing on VITA, TCE and Free File partnerships. The IRS will also launch the Free Filing Modernization Summit to evaluate future solutions to reduce barriers to filing tax returns.