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U.S. taxpayers will once again have to rely on third-party software and websites to file their federal tax returns electronically. The Internal Revenue Service (IRS) officially ended its Direct File program at the beginning of November. The pilot program had allowed taxpayers in several states to fill out and file their returns at no cost.

Critics of Direct File point to its low usage and high cost. For the 2024 tax year, 296,531 returns were filed and accepted by the IRS via Direct File as of April 20, 2025. The U.S. Department of the Treasury reported that the cost “was at least $138 per return.”

The IRS never publicized Direct File well. The program also had limitations on who could use it based on the complexity of their returns. Improvements regarding usability likely could have been made.

Direct File faced an uphill battle from the start. The IRS’ computer systems need to be modernized and upgraded. For-profit tax preparation companies did not want the IRS competing against them. Anti-tax groups and pro–small government groups opposed it.

What we taxpayers are left with is a persistently overly complex tax code and a system that requires us to report data that the government already has. Forms W-2, 1099-DIV, 1099-INT, 1099-R and SSA-1099, among others, are not only sent to us but also to the IRS. Requiring us to enter the data on a tax return is duplicating work.

The IRS could make things more efficient by providing taxpayers with prefilled tax returns that we can then correct and add to (deductions, other income, etc.) before filing. Doing so would reduce errors and save Americans both time and money.

I am a long-term TurboTax user. I will pay to use it again this year. Even though I write our annual tax guide, I like using the software to catch any mathematical errors I might have made. But I mostly use it because the system we have now requires me to enter information that the IRS already has.

Regardless of how you complete and file your taxes, understanding the tax code is important. This year’s tax guide, which includes the changes made by the One Big Beautiful Bill Act (OBBBA), can help.

Wishing you prosperity and good health,

Chuck Rotblut siganture image

Discussion

BARRY J from TX posted 8 months ago:

Charles, like you, I was one of the “other” 150 million or so taxpayers who did NOT use Direct File. I like your suggestions for improvement. They will most likely come from the private sector. Something like AI ChatGPT sounds like an option. The AI industry is in search of applications and needs the revenue. Naw, that’s too obvious. Regards.

ROBERT A from NC posted 8 months ago:

But we NEED an overly complex tax code so Congresspeople can get donations (and bribes?) from their constituents for their pet loopholes. How else can those in Congress become so wealthy?

David L from AK posted 7 months ago:

Regarding tax filing platforms. I have been appreciating the IRS platform FREE FILE FILLABLE FORMS. It looks to be continuing. It becomes available about the end of January each year. One electronically files the input. I stumbled across FFF Forms when an economy version of one of the two big commercial platforms would only give me the correct result on one line item if I incorrectly entered (falsely entered) the asked for data. I never went back to the commercial platform. FFF Forms lacks many features some people appreciate...but those features meant little to me.

DAVID H from IL posted 7 months ago:

OK. The IRS tax code is inefficient and cumbersome. So how about making it simple. No deductions .... at all. Keep tax rates based on total income received. No incentives to have 5 kids, donate to a charity, be 65 or older, or buy electric vehicles for your business. No business deductions for health insurance premiums and no personal deductions for medical expenses, paying property taxes, mortgage interest, or local sales taxes. Take the gamesmanship out of filing income taxes - no deductions for anything. What? Sorry, cannot hear anything over the deafening screaming, moaning, and wailing from the populace. Finally, increase the amount of taxes held back from all paychecks and make estimated taxes due every month. Without tax deductions, the currently crippled IRS will only need to go after those who do not file annual tax forms.

S A from OH posted 5 months ago:

I should be able to file at an official *.gov website, and obtain an IMMEDIATE response that your filing is accepted/complete. I've never been eligible to use 'Direct File'; irs.gov routes me to 'FreeFillableForms' , operated by private companies (HR Block?) to fill forms, with little checking and ~2 days delay for an email accept|reject message. There is no excuse for this type of 1990s service in 2026+. IRS DOES NOT need more/better computers - we have the cloud. Most complaints about tax complexity ignore that each item exists for a reason - good or bad. 16th amendment says Congress can tax income, and each of the complexities is about defining income precisely if not accurately according to *some* principle. My larger concern is that any tax acts to harm the the free market by favoring some class of transactions and disadvantages others - thumb on the scale is bad for risk.

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