It’s no secret the IRS rolled out the red carpet for its new tax filing system: Direct File. The now permanent program generally allows taxpayers under $200,000 adjusted gross income (AGI) to file their taxes directly with the IRS — for free.
Last year’s pilot with 12 participating states proved a success. According to the IRS, more than 140,000 taxpayers filed their taxes through the program and more than 90% reported the experience as “Excellent” or “Above Average.” The agency says total tax refunds issued were in the millions.
But while the IRS has invited all 50 states and the District of Columbia to play ball, not all states are on board. And the program could come to an end if the new Congress passes legislation to scrap it.
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Who knew filing your taxes online could be debatable?
Related: IRS Direct File Will Be Permanent
IRS Direct File states: pilot program and beyond
Direct File opens on January 27, 2025. While only 12 states participating in the program last year, this year 25 states are in.
- Arizona, California, Florida,
- Massachusetts, Nevada, New Hampshire,
- New York, South Dakota, Tennessee,
- Texas, Washington State, and Wyoming, plus:
- Alaska, Connecticut, Idaho,
- Illinois, Kansas, Maine,
- Maryland, New Jersey, New Mexico,
- North Carolina, Oregon, Pennsylvania,
- and Wisconsin.
*Note: Colorado has joined for the 2026 filing season.
Governors of several of these states have touted the perks of Direct File.
For example, Gov. Tina Kotek, who represents Oregon, the first new state to sign on to the new program, reached out on the social media site X (formerly Twitter) to spread the news.
“The Direct File Program is a game-changer for taxpayers. This free filing option will save Oregonians time and money when filing next year,” Kotek wrote.
In a release, Gov. Josh Shapiro (D-Pa.) described the program as “free and easy,” while Gov. Michelle Lujan Grisham (D-N.M.) expressed a similar sentiment in her own press release last year.
IRS Direct File non-program states
To participate in IRS Direct File, states need a proper IT infrastructure. The program requires a new-ish online filing system. States that haven’t recently invested in their online capabilities, may be left in the dust.
According to a letter obtained by a local Virginia news outlet, Gov. Glenn Youngkin (R-Va.) cited that rationale when he announced Virginia was opting out of IRS Direct File. The Commonwealth reportedly has an antiquated online revenue management system and doesn't have the budget to implement Direct File. But above all, Youngkin pointed to what he sees as a larger legal issue.
“Current law does not authorize this approach and therefore a legislative change must be adopted by the General Assembly prior to participation in the new program,” the governor wrote to House Representatives and State Senators.
Notably, Alabama Gov. Kay Ivey (R-Ala.) says the Yellowhammer State is opting out of Direct File due to legal issues as well.
Other states, like Montanna and Nebraska, haven’t officially opted in or out. But there is chatter…
Twelve attorney generals in Montanna wrote to the Treasury Department opposing the Direct File system calling the Direct File program “unconstitutional,” adding, “Congress has never granted the Department of the Treasury authority to create a Direct File program.”
The feeling is reflected in a bill, the “IRS Overreach Prevention Act”. Nebraska and North Carolina House Republicans proposed this bill, arguing three key points. Namely, they claim, the IRS:
- Has not been transparent with its data
- Has overreached its limitations
- Will use the data harnessed in Direct File to levy more tax audits
Direct File news: Is it going away?
While barely in its infancy, lawmakers have floated a proposal to end the program. This isn't new. Since its inception, Direct File, which received funding from the Inflation Reduction Act, has met with opposition.
But late last month a new letter went out to president-elect Donald Trump regarding an immediate end to the program. The proposal, signed by 29 GOP lawmakers, asks the new president to abolish Direct File.
"We write to urge you to take immediate action, including but not limited to a day-one executive order, to end the Internal Revenue Service’s (IRS) unauthorized and wasteful Direct File pilot program. The program’s creation and ongoing expansion pose a threat to taxpayers’ freedom from government overreach, and its rollout and structural flaws have already come at a steep price."
While Trump has not responded publicly to the letter, there are talks of a couple of other proposals that may go into effect in the first 100 days:
- An "External" Revenue Service to account for "tariffs, duties, and all revenue"
- Taxes, border security, and energy policies in "One Big, Beautiful Bill"
Other ways to file taxes
Until we hear more, Direct File will be open for the 2025 filing season.
Also, here is a list of things you can do to save money on tax prep and filing this upcoming tax season, particularly if you don't qualify for Direct File:
- Read up on other ways to file your taxes for free
- Check out your state’s Department of Revenue website for any additional qualifying programs
Alternatively, you may be eligible for the longstanding IRS program Free File.
Free File works with IRS partner tax preparation providers (so you don’t directly file with the IRS). However, the program is generally available for lower incomes; in the 2024 tax year, your adjusted gross income (AGI) must be $84,000 or less to take advantage of Free File.
Lastly, continue to follow the great debate on the IRS Direct File. A lot of tax proposals are floating around and more are expected in the first 100 days of Donald Trump's second presidency. Stay tuned.
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