Wisconsin joins IRS Direct File, cutting costs for families filing tax returns

The Treasury Department announced on Aug. 21 that Wisconsin would be the next state to join the IRS Direct File system, which allows taxpayers to file their income tax returns directly with the Internal Revenue Service at no cost.

Wisconsin joins 12 other states as part of a pilot program for Direct File during the 2025 tax-filing period.

“Thanks to President Biden’s Inflation Reduction Act, more than 600,000 Wisconsin taxpayers will be able to file their taxes online for free, directly with the IRS this coming Filing Season. Direct File will save Wisconsinites time and money and help ensure they receive the tax benefits they are owed,” Treasury Secretary Janet Yellen said in a statement.

According to the agency, 140,000 taxpayers used the system in its first year and saved an estimated $5.6 million in filing fees.

“This is going to save hardworking folks time and money, and we look forward to seeing how the Direct File and new WisTax programs will work together to better serve Wisconsinites when tax season comes around in 2025,” Wisconsin Gov. Tony Evers said in the Treasury Department’s press release.

According to a report released by the IRS in May, 90% of those who used the Direct File system rated their filing experience as excellent or above average, while 86% of respondents said using the system increased their trust in the IRS.

President Joe Biden signed the Inflation Reduction Act in August 2022. A provision of the law provided funds to the IRS to be used for various modernization initiatives and reforms, including the Direct File system.

The legislation was opposed by congressional Republicans and passed only with votes from the Democrats, including a tiebreaking vote in the Senate by Vice President Kamala Harris that helped to secure final passage.

Several leading Republicans, including Texas Sen. Ted Cruz and then-House Minority Leader Kevin McCarthy, falsely claimed that the IRS funding provisions of the law would be used to hound middle-class taxpayers. In addition to the Direct File system and other modernization efforts, the IRS has said the increased funding has allowed the agency to collect unpaid tax obligations from billionaires and large corporations.

Republicans have continued to pursue legislation designed to undo the newly implemented IRS reforms. In 2023 testimony before the House Ways and Means Committee, IRS Commissioner Danny Werfel said that if the Republican plan was fully implemented, it would eviscerate the agency’s ability to fix historic problems and improve customer service. The Biden administration was able to fund the IRS through 2025, but the agency’s funding will require congressional authorization beyond then.

The Direct File system has also faced opposition from tax preparation companies, which generate millions of dollars in profits from consumers for their services. According to an analysis published by OpenSecrets in 2023, the leading companies have spent $90 million since 2003 to lobby Congress against implementing a free tax filing program.