IRS Direct File System Mandated to Continue; All States Must Join by 2026 Tax Year

The aptly named "Get Your Money Back Act" is short, but it packs a punch, focusing entirely on the IRS’s new free direct e-file tax return system. Simply put, this bill makes two big moves: first, it locks in the continuation of the free IRS direct file system, overriding any existing laws that might try to shut it down. Second, and this is the major shift, it mandates that every single state—all 50 plus the District of Columbia—must join and use this federal system for tax years starting after December 31, 2025 (SEC. 2).

The Free Filing Option is Here to Stay

For taxpayers, the first part of the bill is good news: the free federal direct e-file option is no longer a pilot program or a temporary service. It must be maintained by the Secretary of the Treasury, period (SEC. 2). This means that anyone who has used or planned to use the IRS's own free platform to file their federal return can count on it being available. This is a win for accessibility, especially for people who rely on free filing options and want to avoid the cost and complexity of commercial software or paid preparers. It solidifies a free, government-run alternative for filing your federal return.

The State Mandate: One System to Rule Them All

The real policy friction comes from the second requirement: forcing all states and D.C. to integrate their state tax filing into this federal direct e-file system starting with the 2026 tax year. Currently, states have their own systems and often partner with various software vendors or maintain their own state-specific portals. This bill removes that choice, making state participation mandatory (SEC. 2, Mandatory State Participation).

Why This Matters for Your Wallet and Your State

For you, the taxpayer, this could mean a much smoother, single filing experience. Imagine filing your federal and state taxes (say, in California or New York) through one standardized, free platform, rather than navigating different state portals or paying extra fees to software to handle both. That’s the potential benefit: simplicity and cost savings.

However, this mandatory adoption has serious implications for state governments. States lose the autonomy to manage their own tax collection infrastructure. They will need to dedicate significant resources to integrate their complex, unique state tax codes and forms into a federally designed system, all within a tight deadline. This federal mandate raises questions about who pays for these massive implementation costs and whether the standardized federal system can seamlessly handle the quirks of every state's tax law—like property tax credits or specific state deductions. While the goal is streamlined filing, the process of getting every state on board could be a chaotic, expensive headache for state treasuries and IT departments leading up to 2026.