The Best Government Tech in Years Is on the Chopping Block

Direct File is under attack, and if the IRS continues to lose the sustained funding promised in the Inflation Reduction Act, it’s everyday taxpayers who will pay the price.

Direct File is the best tool the federal government has to help millions of Americans file their taxes for free. As we celebrate the 50th anniversary of the Earned Income Tax Credit (EITC), it’s time to learn from the past and broaden access to filing tools that help people claim what they’ve earned.

Paying taxes is an annual obligation—and a headache. For many families, it’s a source of deep stress as they struggle to navigate a complex, costly tax code. The IRS estimates it takes 13 hours to file a tax return. Professional help averages $240 dollars per filing. That’s a steep burden for families already living paycheck to paycheck.

Yet filing a tax return is also essential to accessing critical financial support. Tax credits, especially the EITC, are a major part of anti-poverty programs in the U.S. In 2022, the federal EITC averaged $2,500 per return. The expanded Child Tax Credit (CTC) in 2021 reduced child poverty by 40 percent in just one year. And yet approximately 20 percent of eligible households nationwide miss out on the EITC—especially lower-income, less-educated households.

With an uncertain future for Direct File, it’s more important than ever to consider other ways to lower the barriers for the people who need tax credits most—particularly first-time filers, intermittent filers, and those not required to file because of low annual incomes.

To better understand these barriers, the New Practice Lab led the largest national survey of non- and intermittent-filers to date, reaching over 5,000 households. The majority (88 percent) earned less than $65,000 annually. We learned that 36 percent of respondents identified cost as a barrier, with some forgoing basic utility bills to afford tax services. More than half said they feared making mistakes—even with help—leading many to avoid filing, and thus accessing credits, altogether.

This is the very problem Direct File was built to solve. As part of the Inflation Reduction Act, Congress gave the IRS funding and a mandate to explore the feasibility of a direct e-file system that would modernize a burdensome and fear-filled obligation. In 2024, Direct File launched as a pilot across 12 states, helping 140,803 Americans file their taxes in just three months.

That success is now in jeopardy. Under the Trump Administration, the IRS has already seen $20 billion in funding cuts and a 20 percent workforce reduction. The reorganization of the U.S. Digital Service and the shuttering of 18F—two of the tech teams that helped build Direct File—has also cast doubt on the program’s future. And despite public interest, lawmakers have introduced multiple bills to defund Direct File, arguing (however incorrectly) that the IRS’s Free File Alliance with industry partners is enough.

But the evidence says otherwise: Direct File is working—and here’s what we’re learning.

The demand for Direct File is growing. In its 2024 pilot phase across 12 states, over 140,000 Americans used Direct File to submit their taxes—many filing electronically for the first time or after at least a year of not filing at all. While small in scale, the pilot showed clear interest in a public filing option. In 2025, the IRS expanded eligibility to cover more tax scenarios and added more than a dozen states with leadership from both parties. Now available to about half the country, Direct File is seeing its user base grow rapidly.

“Free, accurate, easy to use, secure” delivers results. User satisfaction with Direct File was overwhelmingly positive. Ninety percent rated their experience as “excellent” or “above average,” and the tool received a Net Promoter Score of +74—higher than TurboTax (+52) and on par with popular consumer brands like Costco (+79) and Starbucks (+77).

Investing in customer service pays off. Direct File’s launch coincided with a dramatic improvement in IRS customer service. In 2023, agents answered 7.7 million calls—a 65 percent increase from the year before—and cut average wait times from 28 minutes to just three. It’s a reminder that government services can be seamless and efficient when they’re built with the public in mind.

Scaling Direct File is cost-effective. Designed as a pilot with modular components that could be tested and scaled for wider audiences, Direct File is built to be the opposite of a monolithic system. Third parties estimate that the cost of expanding the system—including staff, infrastructure, and development—will remain relatively flat, instead of being directly proportional to the number of filers using the tool. As more people use it, the cost per user drops. This year’s rollout across 25 states will offer a clearer picture of its full impact.

Free tax filing keeps money in people’s pockets. In 2019, Intuit and H&R Block controlled 81 percent of individual e-filed returns. These companies spend millions
lobbying to protect their dominance. But Direct File offers a powerful alternative—one that lets Americans file for free, avoid hidden fees, and keep valuable money in their own pockets. It’s a tool that puts the public, not private profit, first.

The American people want this. In 2023, 72 percent of taxpayers told the IRS they’d use an IRS-provided online filing tool. Now that it exists, Congress should be celebrating—not sabotaging—it.

Direct File shows us a better way to build government technology. It started small, tested rigorously, adapted quickly, and delivered strong results. It’s a model we should replicate in other programs that serve the public.

But to fully realize its potential, we need leadership. Whether or not Direct File survives in the long term, states and partners must continue to invest in lowering the barriers to filing via state-simplified filing tools, more outreach, decreased misinformation about penalties, secure data sharing and pre-populated data, smarter calculations in employer withholdings, and entry points designed for people new to the process.

We already have the knowledge to help. Now we just need federal leaders to give us the opportunity.

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