The nation’s tax prep giants and Republican lawmakers are laser-focused on ensuring this is the last year the Internal Revenue Service offers free tax filing.
The Internal Revenue Service’s Direct File is available in 25 states this tax season. But as the program has expanded its reach, it has simultaneously become the target of millions in lobbying dollars aimed at unravelling the federal government’s efforts to offer Americans a free way to directly file simple tax returns.
“We think [the IRS] ought to wind it down, and they ought to focus their attention on other key priorities like modernization,” said David Ransom, a tax lobbyist at Brownstein Hyatt Farber Schreck who represents the American Coalition for Taxpayer Rights, an alliance of tax prep companies including TurboTax owner Intuit and H&R Block.
Ransom called Direct File “unnecessary, costly and unauthorized,” three arguments echoed by critics of Direct File.
Intuit and H&R Block currently dominate the consumer tax preparation market. Direct File could disrupt that dynamic by offering people a program to file their federal taxes for free directly with the Internal Revenue Service.
“It threatens the business model that some of the tax prep companies have taken, which is to see their product as near universal in application,” Vanessa Williamson, a senior fellow at the Brookings Institution and the Urban-Brookings Tax Policy Center, told NOTUS.
“The reality is, Direct File is never going to replace tax prep for lots of Americans,” Williamson added. “There’s obviously going to be a role for private tax preparers going forward, but the question is whether people with very simple taxes — they’ve got one job, one piece of paper and the IRS already has that information, folks like that — whether those folks are going to have their taxes done the way that most other countries handle that kind of thing.”
Several tax prep giants have stepped up their lobbying at this pivotal moment. Intuit spent $3.7 million on federal lobbying in 2024, more money than it has ever spent on federal lobbying in a single year, according to the money in politics trackers at the nonpartisan nonprofit OpenSecrets. The American Coalition for Taxpayer Rights spent $390,000 on federal lobbying last year, more money than it has spent in a single year.
Both Intuit and the coalition disclosed lobbying on a range of issues in addition to Direct File, which means the numbers don’t tell the full story. But tax prep companies are up front about their desire to see Direct File end.
Intuit called Direct File “a solution in search of a problem, a waste of taxpayer dollars and a drain on critical IRS resources.”
“The IRS should focus on its core mission including data privacy and customer service while policymakers in Washington focus on simplifying the tax code,” the company added.
Treasury Secretary Scott Bessent made headlines during his confirmation hearing when he told Sen. Ron Wyden, “I will commit that, for this tax season, that Direct File will be operative and the American taxpayers who choose to use it will.”
But the program faces headwinds from tax prep companies and Republican lawmakers, who currently control both chambers of Congress and overwhelmingly oppose Direct File.
Direct File critics say Congress never authorized the IRS to make the program permanent, as Danny Werfel, the former commissioner of the IRS, recommended last May. Direct File is redundant and wasteful, they argue, and the true cost is not fully understood.
“What is this actually solving for? I think that is a very real question, which I would argue proponents of Direct File have not adequately answered,” a source familiar with tax industry lobbying efforts argued.
“Were there options before Direct File? And the answer to that question is yes. And then the next question is, are there a lot of options? The answer to that question is yes,” they added.
There are some things Direct File can’t do that tax prep companies can, including handling state tax returns and gig work, rental and business income. But proponents of Direct File, including Democratic Sens. Elizabeth Warren, ranking member of the Senate Banking Committee, and Wyden, ranking member of the Senate Finance Committee, say it offers an option that saves taxpayers time and money.
“Americans spend $160 and eight hours on average to file their taxes, often losing a chunk of their sorely-needed refund to do so,” 26 Democratic senators, including Warren and Wyden and 115 representatives, wrote in a Jan. 15 letter to Bessent urging him not to abandon Direct File, which launched last year in 12 states.
Nineteen senators objected to the IRS move to make the program permanent last year, sending a letter to Werfel decrying the agency’s “unilateral and unauthorized action” to recommend the program become permanent. Twenty-nine House Republicans sent a letter to Donald Trump in December calling for him to abolish the program as president, which they described as “unauthorized and wasteful.”
“Under the guise of offering a convenient ‘free-to-file’ alternative preparation service, the IRS asserts itself as the tax assessor, collector, preparer, and enforcer — all in one — when the program is used,” the lawmakers wrote. “This is deeply concerning and a clear conflict of interest.”
Twenty-seven of the 29 Republicans who sent the letter have received a combined $1.8 million in campaign contributions over the course of their careers from PACs affiliated with Intuit, H&R Block, the American Coalition for Taxpayer Rights, the lobbying firms they hired and from individual lobbyists working for those firms, according to an analysis by the progressive nonprofit Public Citizen.
Two of the biggest critics of Direct File are Sen. Mike Crapo, chair of the Senate Finance Committee, and Rep. Jason Smith, chair of the House Ways and Means Committee, who said in a statement last summer that “Congress did not authorize the IRS to create a Direct File program because the American people neither want nor asked for it.”
Crapo also received a $2,500 contribution from Intuit’s PAC the day that the senators sent the letter to Werfel last July. An Intuit spokesperson said the contribution was not tied to the letter and noted that Intuit had also donated to other candidates that day.
“Intuit strongly believes in advocating on behalf of its customers. We engage with policymakers on various issues, from AI and innovation that benefits individuals and small businesses to stronger consumer protections and tax simplification,” Intuit said in a statement.
Crapo and Smith are responsible for crafting the text of the much anticipated tax bill, which will primarily extend Trump’s signature 2017 tax cuts and fold in campaign promises like eliminating taxes on tips and on Social Security payments.
Ransom said it was “possible” the bill could also include something on Direct File.
“We think there could be,” Ransom said. A spokesperson for Crapo declined to comment, and a Smith spokesperson did not respond to a request for comment.
Republicans have also been fighting to claw back millions of dollars obligated to the IRS under the 2022 Inflation Reduction Act, which greenlit $15 million for the IRS to study and report on the cost, feasibility and taxpayer opinion of “developing and running a free direct efile tax return system.”
The IRS accepted nearly 141,000 returns during its first year, and the average filer was 33 years old and had less than $44,000 in adjusted gross income, according to a Government Accountability Office report released in December.
In arguing against the program, Andy Phillips, vice president at The Tax Institute at H&R Block, said nearly 3.5 million Americans used the company’s free, online service during the 2024 tax season.
“After the first year of results, it is obvious to us that Direct File isn’t in the best interests of the Americans — either those who use it or funding it with their tax dollars,” Phillips said in a statement.
The IRS did not respond to questions from NOTUS about how many returns have been approved so far or the future of the program.
As for the cost, the Treasury Inspector General for Tax Administration released a report last Sunday that found the $24.6 million sticker price to develop and operate the Direct File pilot did not include all costs incurred by the government, including around $8.8 million incurred by the Office of Management and Budget for employees detailed to the IRS to help develop the program. Americans for Tax Reform, the anti-tax group run by Grover Norquist, last week used the report to call for the elimination of Direct File.
“Of course business is going to lobby to protect its profits. That’s just what businesses do,” Williamson said. “And, you know, often that’s effective, and that’s a long standing challenge to our democracy.”
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Taylor Giorno is a reporter at NOTUS.