A Congressional Research Service report found that the IRS Free File Program reached about 3% of eligible taxpayers in fiscal 2025, or 3.2 million people. Its low reach comes as Treasury suspends the IRS’s Direct File service for the 2026 filing season.
The funding and the timeline are distinct. The Inflation Reduction Act of 2022 (P.L. 117-169) provided $15 million for an IRS task force to study an agency-run filing option, and the IRS launched Direct File in 2024.
Treasury announced in October 2025 that it would suspend Direct File for the 2026 filing season. It cited “high costs, limited participation, and the [IRS's] need to focus resources on other priorities.”
That leaves the existing program as the IRS-backed free filing option described in its current guidance. The report frames the choice for Congress and the Trump administration as improving Free File’s outreach and oversight or replacing it with an IRS-operated tool.
The IRS’s 2026 guidance says more than 109 million taxpayers qualify for free guided preparation. Taxpayers with adjusted gross income of $89,000 or less can use partner software for federal returns and, in most cases, state returns.
Taxpayers above that income limit can file electronically using Free File Fillable Forms. The guidance, IR-2026-71, dated June 2, 2026, says the program is available through Oct. 15. One partner offers Spanish-language service; several offer free state returns to eligible users, and all partners provide customer support.
E-filing grew as Free File participation stayed modest
The report’s historical figures show that Free File use peaked well below the IRS’s broader e-filing uptake. The agency first met its goal of electronic filing for 80% of individual returns in 2012. By fiscal 2025, more than 93% of individual returns were filed electronically.
| Measure | Earlier point | Later point |
|---|---|---|
| Free File participation | Roughly 6%, or 5.1 million taxpayers, in 2004 | Peak recorded by the report |
| E-filing share of individual returns | 80% in 2012 | Over 93% in fiscal 2025 |
| Participating companies | 17 at the program’s founding in 2002 | 8 in 2026 |
H&R Block and Intuit, which together served roughly 70% of Free File users, left after the 2020 and 2021 filing seasons. Their departures reduced the number of member companies.
A 2020 evaluation by the Treasury Inspector General for Tax Administration found that more than 34.5 million eligible taxpayers paid member companies to file electronically in fiscal 2019. The finding documents paid filing among eligible taxpayers, but does not establish why those people chose paid services.
Free File, Inc. member companies argue the program saved taxpayers $1.5 billion in preparation and filing fees from 2003 to 2018. Critics say confusing web pages, privacy concerns, low use and the diversion of eligible taxpayers to paid services undermine the program.
The program operates under a memorandum of understanding between the IRS and its member companies. The agreement has been extended through Oct. 31, 2029, and no longer prevents the IRS from developing its own free direct e-filing system.
Congress has proposals to restore Direct File and to block it
Two sets of bills in the 119th Congress take opposite positions. S. 3948 and H.R. 7806 would restore Direct File; S. 96 and H.R. 451 would prohibit the IRS from preparing returns through the service. Both sets remain in committee, with no further action recorded.
A 2025 Treasury report outlined planned steps to improve Free File awareness and oversight. The Government Accountability Office also has further evaluations planned. No date for those reviews appears in the material.
IRS Chief Executive Officer Frank J. Bisignano described the program as part of the agency’s digital-first approach.
“IRS Free File makes it easy for taxpayers to meet their filing obligations and claim valuable tax credits at no cost,” Bisignano said. “As we continue to transform the IRS into a digital-first agency, tools like IRS Free File help provide a secure, convenient, and reliable filing experience for taxpayers.”
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA about your specific situation.
