Direct File is 'beloved by its users,' internal IRS report says

Most Direct Files users that submitted their taxes using the free IRS service this year said that using the tool was a good experience and something that they’d recommend for their friends and family, according to an internal IRS report obtained by Nextgov/FCW. 

The IRS document — dated May 13 and titled “IRS Direct File: Filing Season 2025 Report" — follows news reports that the Trump administration has decided not to offer the tool again next year. 

Direct File got fewer users than projected during the recent tax season as media reports about its future swirled. But the internal report, which doesn’t list an author, argues that the tool fits into Treasury Secretary Scott Bessent’s vision for the future of the IRS. 

“With clear evidence that Direct File offers significant value to taxpayers, decision-makers should consider whether they are ready to place a larger bet on Direct File,” the report read. “Direct File is beloved by its users, who can easily file accurate tax returns fast.”

The tax agency debuted the free tax filing option as a pilot last year after agreeing to stay out of the tax prep landscape for decades — and therefore not compete with private industry for business — in return for tax software companies offering free options for most Americans. This year, it expanded where the tool was offered and for what types of tax situations.

Some of those companies, like Intuit and H&R Block, have had to pay settlements for pushing taxpayers towards paid products, even when they could use free ones, and for deceptive advertising about “free” products that actually cost money.

The average taxpayer spends $150 and 9 hours a year on their taxes, Suzanne Chapman — who previously served as the director of user experience for Direct File — said at a civic tech conference last week. Billions of dollars in benefits delivered through the tax code go unclaimed annually, at least in part because of how confusing tax filing can be. 

Republicans have fiercely opposed the continuation of Direct File, arguing that the IRS doesn’t have the authority to run the program and that the IRS has a “conflict of interest” in doing so. The tax agency should instead promote its existing program with tax prep companies, which has long been vastly underutilized, GOP lawmakers have said. Over thirty House Republicans wrote to President Donald Trump late last year saying that Direct File is a “threat to taxpayers’ freedom from government overreach.”

Tax prep companies have also upped their lobbying efforts in recent years. 

Direct File supporter Sen. Elizabeth Warren, D-Mass., told Nextgov/FCW in a statement that “this new data proves what we’ve known to be true: Direct File works.”

“It gives Americans an easy-to-use, free way to file their taxes — and everybody who uses Direct File loves it. Donald Trump sabotaged the program to give a massive handout to giant tax prep companies instead,” she said.

How Direct File Did

Big picture, 296,531 people successfully submitted an accepted tax return this year using Direct File, which the IRS spent $41 million on this filing season.

Ninety-four percent of surveyed users rated their experience as “excellent” or “above average” — up from 90% last year, according to the report — although people that started but didn’t finish the process weren’t surveyed.

“This report should help clarify the Direct File debate. It’s not about whether the product worked well or not. It’s not about whether it’s cost prohibitive,” Danny Werfel, former IRS Commissioner, told Nextgov/FCW. Nominated by Biden, he oversaw the beginnings of Direct File. “It’s simply about whether you believe a free option where you file directly with the IRS should be on the menu for taxpayers or not.”

The internal document touted an increase in acceptance rates — 91% of returns were accepted on the first try, it said. The team had also added to what users could import into the tool instead of typing it in themselves, including their biographical information and W-2 forms.

Still, Direct File struggled with drop off, where people who started using the tool didn’t follow through and use it to file their taxes. This is a problem Direct File also saw during its pilot year, although the agency saw some improvement this year. Among the possible reasons is people finding out that they’re not eligible once they started, or potentially struggling with or being deterred by the identity verification that the IRS requires through vendor ID.me, the report said. 

Overall, traffic for Direct File was only up by 16% compared to last year, something the report attributed to a “lack of awareness and public confusion.” Only 30% of people that used Direct File last year came back to use it again this year, despite the fact that it got high marks from users in its inaugural tax season.

The IRS deemphasized the program on its website, the report said, and the media coverage this filing season focused on the question of if the tool existed or would continue to in the future. 

Billionaire Elon Musk caused confusion in early February when he posted on X that the team powering Direct File was “deleted,” leading to headlines like “Elon Musk says he 'deleted' IRS Direct File. Can taxpayers still use the free service?” Direct File saw a drop in use after that.

What Comes Next

At this point, most of the team powering Direct File is no longer at the IRS. 

“We were told to stop working on Direct File,” said Chapman. “Basically the day we launch it at the beginning of the tax season is also the day we start working on the next year.”

The team was told to “‘Just stop. Don’t keep working on the future state of Direct File,’” she said. “Because of that, most of the team did leave.”

The group had been planning on expanding the tax scope covered by the tool, as well as what states it is offered in, said Chapman. More data import was also on the horizon.

The dream was to use the tool as an “on-ramp” to other benefits by seeing what a taxpayer was eligible for using the information given to file their taxes, said Chapman. The IRS and Treasury Department didn’t immediately respond to requests for comment.

Moving forward, some alumni of Direct File are working on a new project on the future of tax filing. Last week, most of the code for Direct File was published on GitHub as open-source software. 

Amanda Renteria, CEO of nonprofit Code for America, said that “we have not given up on it” when asked about the nonprofit’s work last week. The civic tech organization has been fielding a tool to help states with Direct File so that users have a way to finish their state taxes after filing their federal ones with the IRS tool.

Direct File “was built by a talented startup team within the IRS, has user satisfaction rates higher than Netflix and Apple, and increased trust in the IRS,” Merici Vinton, former Direct File deputy, told Nextog/FCW. "Direct File showed what real government efficiency is — identifying a need and delivering for people in a way that actually makes their lives better.”