Trump administration to scrap IRS Direct File, could improve outlook for tax firms - AP

Investing.com -- The Trump administration plans to shut down the IRS’ Direct File program, a free, government-run electronic system for submitting tax returns, according to the Associated Press, citing two people familiar with the decision. The move marks a major reversal of a Biden-era policy aimed at simplifying the tax filing process.

Direct File had earned praise for its ease of use and low friction; last season, the IRS accepted over 140,000 returns through the tool across a dozen pilot states. The program had expanded this year to cover roughly half the country, though current usage figures have not yet been released.

Critics of the system—including some Republican lawmakers and private-sector tax firms—argued it duplicated services already available through commercial providers. Industry players claimed the program wasted taxpayer resources and added redundant complexity to an existing ecosystem.

The decision to phase out Direct File aligns with broader federal agency cutbacks led by Elon Musk and the Department of Government Efficiency. In February, Musk announced on X that he had “deleted” 18F, a government tech unit that had helped develop Direct File.

The sunset of the program could benefit commercial tax preparation software firms, including Intuit (NASDAQ:INTU), which owns TurboTax. Without the government offering a free, direct alternative, more filers may turn to third-party platforms, especially those offering user-friendly digital tools.

Intuit has long opposed publicly funded filing systems, arguing that free services from private firms—while often limited in scope—already meet consumer needs. The rollback of Direct File could stabilize or expand customer acquisition at a time when digital tax prep competition has intensified.

While the IRS has made no formal comment, the program’s uncertain future signals a broader reorientation in federal tech priorities and taxpayer services. For companies like Intuit, the shift could translate into rising volumes and a stronger foothold in tax season 2025.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.