Direct File Act

Floor Speech

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Mr. CRAPO. 3948, the Direct File Act of 2026.

After listening to those who have described why we need it, you might say: Well, how could there be a different story or another side of the coin?

I will tell you. There is a huge disagreement about the facts, and there is a huge disagreement about what has happened, and there is another side of the coin.

This bill seeks to reverse the Treasury Department's recent suspension of the Direct File Program. Direct File was an unauthorized, unnecessary program that wasted taxpayer funds and presented a clear conflict of interest by empowering the IRS to be not only the evaluator of tax returns and the enforcer of tax returns but the preparer of tax returns, empowering the IRS to prepare tax returns for the same taxpayers that it was later going to audit.

And, by the way, when that did happen with some of these taxpayers, they were successfully audited by the IRS for errors in their returns.

As part of the Biden administration's so-called Inflation Reduction Act, congressional Democrats provided the IRS with $15 million to study the feasibility of providing a new, direct e-file program. On the same day that the study was due to Congress, the Biden administration announced the launch of a limited pilot Direct File Program. This so- called pilot program quickly expanded, spending tens of millions of dollars, despite the narrow mandate provided by Congress.

As part of the Working Families Tax Cut Act, Congress further directed the Treasury Department to evaluate and study alternatives to direct file.

Treasury's subsequent October 2025 report found significant concerns with the Biden administration program, warranting its suspension.

What were those concerns? In its report, the Treasury found that the Direct File Program accounted for just two-tenths of 1 percent--get that--0.2 percent of the 146 million tax returns filed in the year 2024.

Yet despite its small footprint, Direct File cost taxpayers at least $41 million to administer. That is $138 per return in 2024 and nearly three times the total funding authorized by Congress. Alarmingly, the Treasury acknowledged that these figures likely underestimate the true cost of the Direct File Program with the IRS failing to include costs for employee support, online services, and submission processing--among others.

A later report from the nonpartisan Treasury Inspector General for Tax Administration further confirmed that Direct File had poor performance. Contrary to what you had been told, that everyone loved it, it had poor performance.

The Treasury Inspector General for Tax Administration report found that nearly 60 percent of the registered users abandoned their return before they even filed it, meaning that less than half of the registered users even ended up using Direct File to submit a return.

The Treasury Inspector General for Tax Administration also estimated that over 3,000 returns were filed with preventable errors burdening taxpayers and delaying refunds.

There are actually free file options available. This notion that this is TurboTax and H&R Block trying to divert people into its system is simply false. Ultimately, the Democrats' Direct File experiment demonstrates that the IRS can better serve taxpayers by highlighting existing free filing options and improving basic customer service rather than diverting a growing share of its resources and attention to redundant, expensive government-run programs.

Now, what do I mean when I say there are alternatives? Looking at the last year when Direct File was operational, it processed 296,531 accepted returns out of 160 million total filings. That is the .2 percent number.

There are multiple options available to almost all U.S. taxpayers to be eligible to use programs like IRS Free File, a public-private partnership that has no cost. In the same year that 296,000 people used Free File, after I think--I don't know if that number is before or after 60 percent of them declined to stay in the program--Free File filed 1.9 million returns for those who wanted to do it--a public- private partnership.

In addition, there is a group called the Volunteer Income Tax Assistance Program and the Tax Counseling for the Elderly Program--both of which provide free, in-person preparation at thousands of locations nationwide. And these two programs themselves prepared approximately 2.7 million more tax returns for free for people in 2024, vastly exceeding Direct File's reach at a fraction of the cost.

The myth is that people have to go pay money to get their tax returns prepared, when the reality is there are multiple private sector and private-public partnerships that are available for almost all Americans to have their tax returns prepared for free.

Ultimately, the Democrats' Direct File experiment demonstrates that the IRS can better serve taxpayers by highlighting existing free filing tax options and improving its own basic customer service, which it did this year, rather than diverting a growing share of its resources and attention to a redundant, expensive government-run program.

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