Direct File Act of 2026

Key Points

• This bill would permanently require the IRS to run a free online system where people can prepare and file their federal income taxes without paying for private tax software. The program must be owned by the federal government and cannot charge any fees.
• The system would work like an interview, asking plain-language questions and automatically pulling in data the IRS already has — like W-2 income — to make filing easier. It must be mobile-friendly, available in multiple languages, and meet federal accessibility standards.
• By 2028, at least 50% of taxpayers in participating states must be eligible to use the free service. States that integrate their own tax filing with the federal system — or that don't have a state income tax — count as participating states.
• The bill offers $1 million grants to each participating state to help them build a system that lets people file their state and federal taxes together in one seamless process.
• The bill bans the IRS from entering into any future agreements that prevent it from offering free tax preparation services, and voids any existing such agreements within 30 days of enactment. This directly targets past deals like the IRS Free File agreement with private tax software companies.
• Information returns (like W-2s and 1099s) would need to be filed earlier so the IRS has taxpayer data ready to import into Direct File. The program is authorized for funding through fiscal year 2035.