Direct File’s End Puts Onus on Private Sector to Deliver: Werfel

When I was IRS commissioner, few issues drew sharper debate than whether the government should offer its own free online tax-filing tool.

From one side of my desk, I heard frustrated taxpayers and consumer advocates argue that Free File—the system that lets income-qualified taxpayers access private tax software through the IRS website to prepare and file their taxes at no cost—was too hard to find, too often led to upselling, raised concerns about how taxpayer data was being used, and too rarely reached those who qualified.

On the other side, the tax-software industry was unwavering in its stance that a government-run Direct File program wasn’t needed. The private sector, they said, was better positioned to deliver a high-performing, truly free solution for most taxpayers—and millions had already successfully used Free File.

One conclusion needs no debate. Taxpayers should have a free way to file their taxes online—period. Especially now, when affordability shapes nearly every household decision, that principle shouldn’t be up for discussion. For low-income taxpayers in particular, the availability of a free filing option can determine whether they file at all, or whether they forgo a refund they’re owed.

Last week’s Treasury Department Report on the Replacement of Direct File formally ends Direct File as a choice on the menu. The government option is gone. Free online filing will now come only from the private sector.

That exclusivity doesn’t mean the government and other stakeholders can step aside. The administration’s report recognizes the significant room for improvement in the legacy Free File program and outlines steps to close those gaps. We should view this as a call for higher standards, not a handoff.

I saw firsthand the promise and potential of the Direct File tool. And I could spend time debating the report’s conclusions that Direct File was too costly or insufficiently used. But the more productive focus, for now, is the road ahead, ensuring this new model delivers for taxpayers now that the private sector has the field to itself.

The Treasury report clearly signals that Free File needs upgrading and offers a roadmap to get there. It calls for:

• An updated taxpayer survey to better understand preferences and barriers
• A Free Filing modernization summit to convene industry, advocates, and states
• A clear, uniform definition of “free,” so taxpayers know exactly what they’re being offered
• Stronger data from software providers on access, completion rates, and satisfaction
• A supplemental report to Congress tracking measurable progress

These are meaningful steps. They give Treasury, the IRS, and the public the tools to evaluate how well this model performs and to ensure “free” truly means free. They also signal to the private sector that expectations are higher now than ever before.

It’s now up to all of us—policymakers, advocates, the news media, and the public—to use these tools to keep a bright light on Free File’s performance. Oversight isn’t about blame; it’s about trust.

Free filing must work across incomes, states, and devices. It must be transparent, accessible, and reliable. The government has provided a framework for accountability, but follow-through will determine whether taxpayers benefit from it.

This approach also offers a broader lesson for other areas of policy. It’s acceptable, even healthy in many situations, for government to step back from providing certain services when the private sector can do the job as well or better. But that shift only works if government, consumer advocates, and the public stay engaged to verify that private providers actually deliver.

Which brings us back to where this debate began. The private sector fought hard for this outcome. For years, industry leaders argued that Direct File was redundant and that if Free File were modernized and supported, it could meet the needs of all taxpayers.

Now that they got their wish, the responsibility to prove that argument lies with them. If industry participants want Direct File put to rest for good, this is their moment. If they deliver a seamless, transparent, genuinely free experience for taxpayers that protects both their wallets and their data, Direct File won’t need to return.

But if the same barriers persist—hidden fees, limited eligibility, confusion, or new doubts about data privacy—consumer advocates and policymakers will have every reason to revisit a government alternative.

I hope the private sector is up to the challenge—both the companies already in the space and any new entrants willing to compete on accessibility and trust. Taxpayers deserve that.

The government has stepped back. The framework for accountability is in place. Now it’s up to industry to deliver the free filing experience it promised.

For the commercial providers who pushed for this outcome, it’s game time.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Danny Werfel was IRS commissioner from 2023 to 2025 and is now executive in residence at the Johns Hopkins School of Government and Policy and a distinguished fellow at the Polis Center for Politics at Duke University.

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