Direct File is the IRS’ first attempt to provide a free filing program comparable to existing commercial software.

While the pilot was limited to people with simple tax returns in a handful of states, the Department of the Treasury estimated that one-third of taxpayers in those states — almost 19 million people — were eligible to use the tax service this past filing season.  The IRS conducted a pilot program of the direct file option in 12 states for the 2023 tax year and reported that 140,803 taxpayers used it to save $5.6 million on preparing their tax returns.

The IRS says it is looking to expand eligibility and plans to work with all states that want to partner with Direct File in 2025. IRS Commissioner Danny Werfel says many taxpayers across the nation want the IRS to provide more than one no-cost option for filing electronically. “So, starting with the 2025 filing season, the IRS will make Direct File a permanent option for filing federal tax returns. Giving taxpayers additional options strengthens the tax filing system. And adding Direct File to the menu of filing options fits squarely into our effort to make taxes as easy as possible for Americans, including saving time and money,” said Werfel.

“We urge Governor Younkin to agree that Virginians can participate in Direct File.  In addition to the savings in time and money, we have long been concerned about how low-income Virginians are treated by some for-profit tax preparation services,” said Jay Speer, Executive Director and consumer rights attorney with VPLC.

According to a recent report, tax prep companies rely on and take advantage of economically disadvantaged communities. In fact, areas with the most people claiming the Earned Income Tax Credit have 75 percent more tax preparers for each person filing taxes compared to areas with fewer people claiming the credit. Furthermore, these major companies primarily hire what are called “unenrolled” tax preparers who lack expertise, certification, or credentials in tax rules and policy.

Tax prep companies bank on their proximity, non-stop advertisement, celebrity endorsements, sweepstakes, and giveaways to legitimize their illegitimacy.