Why It Matters
The IRS Free File Program (FFP) reaches only about 3% of eligible taxpayers annually, even as e-filing has become nearly universal, according to a new Congressional Research Service (CRS) report.
That leaves Congress and the Trump administration a choice: keep the Free File Program and improve its outreach and oversight, or replace it with an IRS-operated filing tool, an option whose immediate availability is limited by the suspension of the IRS's Direct File (DF) for the 2026 filing season.
The current memorandum of understanding (MOU), extended to Oct. 31, 2029, no longer bars the IRS from building its own free direct e-filing system, removing a constraint central to the program since its founding.
The Big Picture
The IRS first reached its goal of e-filing 80% of individual returns in 2012, and by fiscal 2025 e-filing had risen to over 93% of individual returns.
Participation in the FFP itself has moved in the opposite direction. Member companies fell from 17 at the program's founding in 2002 to 8 in 2026, after H&R Block and Intuit, which together served roughly 70% of participants, left at the end of the 2020 and 2021 filing seasons.
Taxpayer use peaked at roughly 6% (5.1 million taxpayers) in 2004 and stood at about 3% (3.2 million) in fiscal 2025. A 2020 Treasury Inspector General for Tax Administration evaluation found that more than 34.5 million FFP-eligible taxpayers paid for e-filing through member companies in fiscal 2019 alone.
Proponents, including Free File, Inc. member companies, argue the FFP saved taxpayers $1.5 billion in preparation and filing fees from 2003 to 2018. Critics contend the program should be replaced by an IRS tool open to all taxpayers, citing confusing web pages, low participation, privacy concerns and the diversion of eligible filers to paid services.
The Inflation Reduction Act of 2022 (P.L. 117-169) gave the IRS $15 million to create a DF task force to explore the feasibility of an IRS-run program, and the IRS launched DF in 2024, but Treasury announced in October 2025 that it was suspending DF for the 2026 filing season, citing "high costs, limited participation, and the [IRS's] need to focus resources on other priorities."
The Bottom Line
In the 119th Congress, two sets of bills sit in committee with no further action recorded: S. 3948 and H.R. 7806 would restore DF, while S. 96 and H.R. 451 would prohibit the IRS from preparing returns through DF.
The FFP MOU runs through Oct. 31, 2029, and a 2025 Treasury report outlined planned improvements to program awareness and oversight, with additional Government Accountability Office evaluations also planned.
Access the Legis1 platform for comprehensive political news, data, and insights
Spot something wrong? Report an issue with this article
