Wisconsin taxpayers could stand to lose out on about $145 million in unclaimed tax credits annually, after the Trump administration ended a free government tax filing program created to help low-income and working families simplify tax filing.
A new analysis from the nonprofit Economic Security Project estimates the IRS Direct File program would have saved Wisconsinites nearly $340 million annually in filing fees, time, and unclaimed tax credits.
Adam Ruben, vice president of the project, explained the program was created under the Biden administration for low-income, working, and middle-class people with income thresholds under $150,000. He said Direct File helped put earned money back in their pockets as about one in five people miss out on tax credits for which they are eligible.
"They can be complicated and expensive to claim, especially if English is not your first language, and the average taxpayer spends $160 and 9 hours filling out their tax return," Ruben pointed out. "That's just prohibitive for a lot of low-income families."
Up to 30 million people qualified for Direct File in 2025 and 300,000 taxpayers used it. The acting IRS commissioner said the program was not utilized enough and private companies could do a better job. Private tax preparation companies aggressively lobbied to dismantle Direct File as their business relies heavily on paid filing services.
Ruben acknowledged low-income taxpayers can use VITA for free tax help but it is chronically underfunded and cannot meet the demand. He stressed Direct File was created to fill the gap. Ruben added about 75% of people are eligible for free tax filing but fewer than 3% of people actually manage to file their taxes for free because of all the upselling.
"Of course, tax prep companies spend hundreds of millions of dollars every year advertising their free tax filing services," Ruben observed. "But in many cases, courts and federal investigators have found that's a bait and switch."
In addition to saving taxpayers billions, he emphasized Direct File was also projected to save the IRS about $300 million by reducing errors, lowering customer service demands and moving people away from costly paper returns. Its cancellation comes as the Trump administration promises to focus on affordability and cost-of-living issues in the upcoming year.
This story is based on original reporting by Josh Israel for The Wisconsin Independent.
