IRS gets permanent free tax-filing service; commercial software faces competition

What it does

This bill codifies the IRS Direct File program—a free, government-operated online tax preparation and filing service—into permanent law and prohibits the IRS from signing agreements that restrict its ability to offer tax preparation services. The bill requires the IRS to expand eligibility to at least 50% of taxpayers in participating states by 2028, provide the service in multiple languages with mobile access, and offer live customer support. States that integrate their own income tax filing into the federal system receive $1 million grants. Ordinary taxpayers benefit by gaining access to a free alternative to commercial tax software.

Why we flagged it

The bill's core mechanism is establishing a permanent, free government tax-preparation service and prohibiting contractual restrictions on the IRS's ability to offer it. This is straightforward public-service legislation with no hidden riders or self-dealing provisions.

What the text implies

• State income tax integration may create data-sharing arrangements between federal and state tax authorities, expanding the scope of tax-authority coordination beyond federal filing alone.
• The $1 million per-state grant program incentivizes state participation but creates a two-tier system: states that integrate receive funding; those that don't are excluded, potentially disadvantaging taxpayers in non-participating states.
• Codification into permanent law removes the program from annual appropriations scrutiny, insulating it from future defunding attempts but also reducing congressional oversight of its operations and expansion.
• The requirement to expand eligibility to 50% of taxpayers by 2028 and 'maximum extent possible' thereafter may eventually displace commercial tax-prep software for a large share of the filing population, creating long-term market disruption.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

Ordinary taxpayers gain access to a free, government-operated tax-filing service with no fees, reducing out-of-pocket costs for millions and providing a public alternative to commercial software. The bill directly expands taxpayer choice and accessibility, particularly for lower-income filers and those in underserved communities.

Named in the bill

Internal Revenue Service (IRS), Secretary of the Treasury, State tax agencies, Participating States, Taxpayers (individual income tax filers)

Where it stands

126 cosponsors: 126 Democrats.

• Mar 4, 2026 — Introduced · Congress.gov: “Introduced in House”
• Mar 4, 2026 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

5 lobbying clients named this bill on 6 disclosure filings across 2 quarters, Mar 2026 to Jun 2026. Those filings disclosed $2,374,577 in lobbying spend. A filing names 6 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 78% of bills with at least one filing.

Brad Sherman, the sponsor, reported $777,000 in PAC receipts in the 2026 cycle.

• Intuit, Inc. and Affiliates (formerly Intuit, Inc.) — $2,100,000 on 2 filings
• Public Citizen — $99,577 on 1 filing
• Alliance for Retired Americans — $85,000 on 1 filing
• Intuit, Inc. and Affiliates — $60,000 on 1 filing
• Intuit, Inc. and Affiliates — $30,000 on 1 filing

Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.