Republicans to Remove Megabill Provision Ending Direct File

Language terminating the IRS-run free electronic filing program is being removed from the GOP tax megabill, but funding to create a task force to study its replacement will remain, according to a source familiar with discussions.

Republicans agreed to remove a portion of the bill that would end the Direct File program within 30 days of the bill’s enactment, conceeding to Democrats’ challenge before the Senate parliamentarian that the provision would violate budget rules, the source said. The bill will still include a provision to set aside $15 million for the task force to design a “better public-private partnership” that would replace Direct File and the existing Free File program under which tax-prep companies partner with the IRS to offer free software.

• The IRS launched Direct File in 2024, following Democrats’ 2022 tax-and-climate law. That law set aside $15 million for the agency to report on the feasibility of creating what became the Direct File pilot.
• A memo from Senate Finance Committee Democrats Friday said Republicans may drop the proposal to scrap the IRS Direct File program.
• A request for comment from the Republican Finance Committee went unreturned.