HR7806-119

What This Bill Does

The Direct File Act of 2026 prevents the Treasury Department from entering into agreements that restrict its legal right to provide tax return preparation software, tax preparation services, or tax filing services. Existing agreements with those restrictions become void 30 days after enactment.

The bill codifies an IRS-owned online program for individual income tax preparation and filing. The program must use IRS records when taxpayers elect to import them, be interview-based, use plain language, support multiple languages, work on mobile devices, meet section 508 accessibility standards, appear prominently on the IRS website, be promoted through mass marketing and targeted outreach, provide integrated customer support including live chat, and charge no taxpayer fee. For taxable years after 2027, at least 50 percent of taxpayers in participating States must be eligible, and eligibility must continue expanding.

The bill also requires state and local income-tax integration for participating States when section 6103 permits it, including information sharing and $1 million grants for States that build compatible filing functionality. Treasury must report annually on Direct File usage, satisfaction, barriers, and improvement plans. The bill changes electronic information-return deadlines and authorizes such sums as necessary for fiscal years 2026 through 2035.

Who Benefits and How

Individual taxpayers benefit from a free, IRS-owned filing path with prefilled data, mobile access, live chat, multilingual support, and no filing fee. Taxpayers in participating States benefit if federal and state returns can be filed together. State tax agencies benefit from $1 million integration grants when they build compatible state filing functionality. IRS digital-service teams benefit from statutory authority to operate and expand Direct File.

Who Bears the Burden and How

The IRS and Treasury must build, operate, market, support, and report on Direct File while expanding eligibility after 2027. Participating State tax agencies must meet compatibility standards to receive grants and integrate their systems. Private tax preparation software companies and agreement counterparties lose the ability to rely on restrictive agreements that keep the federal government from offering competing filing services. Federal tax-administration appropriations bear the cost of implementation from fiscal years 2026 through 2035.

Key Provisions

• Bars new Treasury agreements that restrict federal tax preparation, software, or filing services.
• Voids existing restrictive agreements 30 days after enactment.
• Creates a government-owned online individual income tax preparation and filing program.
• Requires IRS data import, interview-based filing, plain language, multilingual support, mobile access, accessibility compliance, promotion, and live customer support.
• Makes the program free for taxpayers and allows filing even when a taxpayer is not required to file.
• Requires at least 50 percent eligibility in participating States for taxable years after 2027 and continued expansion.
• Supports state and local filing integration, including $1 million grants for compatible participating States.
• Requires annual congressional reports on usage, satisfaction, barriers, and improvement plans.
• Authorizes such sums as necessary for fiscal years 2026 through 2035.