Don't Mess With Taxes

UPDATE, Sept. 5, 2025: Has your state joined Direct File? Check out this special Direct File 2025 Participating States page.

GOP members of congress and the Internal Revenue Service are on a collision course when it comes to the agency’s Direct File program.

Republican Reps. Adrian Smith of Nebraska and Chuck Edwards of North Carolina last week introduced legislation to block the IRS from continuing its Direct File program.

Meanwhile, the Treasury Department also announced last week that another state has joined the Direct File program for the coming 2025 filing season. New Jersey is the latest jurisdiction to allow its residents access to the IRS developed and operated online tax preparation and e-filing program.

Earlier this summer, Oregon announced it will participate next year in the IRS program that allows eligible filers to bypass private tax software options.

Looking to shut down Direct File: Smith and Edwards, however, are trying to stop that from happening.

H.R. 9109, which the pair has dubbed the IRS Overreach Prevention Act, is necessary to stop IRS expansion into citizens’ tax lives, and prevent the agency's potential ability to “predetermine what tax they owe and burden them with audits.”

"Since Democrats supersized IRS funding in 2022, the Biden-Harris Administration has been steadily moving toward its goal of comprehensive monitoring over the personal finances of Americans,” said Smith, a member of the House Ways and Means Committee. He added that Direct File “is part and parcel of this scheme.”

Edwards, who serves on the House Appropriations and the House Budget committees, focused on Direct File’s cost.

“Reports of inaccurate data surrounding the cost and benefit of the IRS’ Direct File program coupled with actual usage rates demonstrate that the Free File program, which was used 17 times more than Direct File in pilot states, sufficiently addresses the need for free, tax filing software without federal government intervention,” said Edwards.

IRS authority questioned. Again: Edwards and Smith also argue that the Direct File pilot was not expressly authorized in the Inflation Reduction Act, which did provide added funds the IRS used to create the program.

Smith specifically asked IRS Commissioner Danny Werfel about the IRS authority to create Direct File during his testimony in February before the House tax writing panel.

The Nebraska lawmaker was not pleased with Werfel's reply that the IRS has "a responsibility and an authority to offer taxpayers different approaches for how to meet their tax obligation."

In addition to prohibiting the IRS from continuing Direct File, H.R. 9109 would prevent the agency from developing a successor program.

Seven other GOP House members are cosponsors of the bill, which is pending in the W&M committee. They are Reps. Don Bacon of Nebraska, Kevin Hern of Oklahoma, Carol Miller of West Virginia, Guy Reschenthaler of Pennsylvania, Greg Steube of Florida, Claudia Tenney of New York, and Steve Womack of Arkansas.

IRS, Treasury moving forward: However, neither general GOP opposition to Direct File, nor the introduction of H.R. 9109 is deterring Treasury and the IRS.

This filing season, a dozen states participated in the Direct File pilot, allowing eligible taxpayers within their borders to use the federal tax prep and electronic filing program. In states where individual state income tax is collected, those taxpayers were directed to online options to help them fulfill that portion of their annual tax obligations.

By the April 15th Tax Day, 140,000 taxpayers in those 12 states had used Direct File, claiming more than $90 million in refunds. Treasury and IRS said that by avoiding private tax software middlemen, those taxpayers saved an estimated $5.6 million in filing fees.

In May, Treasury and IRS deemed the 2024 filing season pilot a success and announced Direct File would be made permanent and open to all states. Participants are starting to trickle join the Direct File club.

New Jersey is the latest state to offer Direct File to its residents. In June, Oregon announced its participation. More than 1 million New Jerseyans and around 580,000 Oregonians will be eligible to use the free online filing tool next filing season.

When the Treasury and IRS announced the continuation of the Direct File program in May, they also invited all 50 states and the District of Columbia to join for the upcoming filing season.

The R.S.V.P.s have been a bit slow, but you’ve got to start somewhere. The recent additions of Garden State and Beaver State taxpayers to the Direct File fold bring the total state participation count to 14. That’s also this weekend’s By the Numbers figure.

You also might find these items of interest:

• IRS Direct File is moving ahead, slowly
• Direct File usage exceeded IRS, Treasury expectations
• FTC takes actions against Intuit/TurboTax and H&R Block tax software programs

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