Direct File Activity for the 2025 Filing Season

Report Information

Summary

The One Big Beautiful Bill Act, enacted in July 2025, appropriated $15 million to the Department of the Treasury to deliver a report to Congress on the potential replacement of any direct e-file program run by the IRS. In October 2025, following the 2025 Filing Season, the Department of the Treasury reported to Congress that the IRS will suspend Direct File and recommended that the IRS refocus efforts on strengthening existing free filing programs, particularly Free File. The concerns discussed throughout this report should be considered as the IRS explores how to strengthen existing free filing programs. During the 2025 Filing Season, the IRS estimated that 32 million taxpayers would be eligible for Direct File. However, only 751,000 taxpayers registered with Direct File. This was a 78 percent increase from 423,000 registered taxpayers during the 2024 Filing Season. Direct File management attributed the lower than expected usage to confusion in media coverage about availability and a lack of outreach. Additionally, 59 percent of the 751,000 Direct File users did not submit a tax return through the system during the 2025 Filing Season. Improvements were made to significantly reduce the number of rejected tax returns filed through Direct File. However, there are opportunities to further reduce this number. Direct File was not identifying and alerting the taxpayer of errors before the submission of the tax return. Doing so would allow the taxpayer to correct the issue and submit a correct tax return. Direct File also began importing some information returns during the 2025 Filing Season to reduce human error and improve the taxpayer’s experience. We found that opportunities exist to expand the import of information returns, e.g., tax forms for secondary filers, corrected tax forms, and additional tax forms available to taxpayers through their Individual Online Account. While the IRS estimated that Direct File would cost $61.2 million for Fiscal Year 2025, the IRS’s actual cost for Fiscal Year 2025 totaled $16.2 million as of May 2025. However, the IRS’s reported cost for Fiscal Year 2025 continued to exclude the costs from all IRS support functions. For example, Direct File did not include costs for employees detailed to the IRS by another federal agency to help develop and pilot Direct File, costs for other IRS functions’ employees who supported the program, and authentication costs.