The FAIR PREP Act of 2025 prohibits the Treasury Secretary from preparing tax returns or offering electronic tax preparation services, with exceptions for existing free file programs, and requires explicit congressional authorization for developing new electronic tax preparation services.
Adrian Smith
Representative
NE-3
The FAIR PREP Act of 2025 prohibits the Treasury Secretary from preparing tax returns or refund claims, including through IRS-run electronic services, with exceptions for qualified programs like the IRS Free File Program. It defines "prepare" and "electronic tax preparation service" to clarify the scope of the prohibition, which applies to returns filed more than 30 days after enactment. The Act also restricts the Treasury Secretary from spending funds on developing or operating electronic tax preparation services without explicit authorization from a new law.
FAIR PREP Act Blocks IRS-Run Free Tax Prep Service, Starting in 2025
The "Fostering Autonomy in Independent Returns by Prohibiting Redundant and Extralegal Programs Act of 2025," or FAIR PREP Act, stops the IRS from creating its own free, online tax preparation service. The bill, effective 30 days after enactment, essentially prevents the IRS from offering a direct competitor to paid tax prep software. The core purpose is to prevent the executive branch from side-stepping Congress by creating a new service without explicit approval.
Tax Filing Under the New Rules
This legislation means no new government-run, free tax prep software. While the current IRS Free File program (a partnership with private companies) and other "qualified return preparation programs" are exempt, the bill blocks the IRS from developing its own system. If you're, say, a freelance graphic designer who usually relies on basic, free tax filing, this could mean needing to shell out for software or services you didn't need before. Or, if you are a construction worker and have been waiting for the IRS to debut their own software, you will have to wait longer. Section 2 of the bill is where all of this is laid out, defining what "prepare" means and specifically excluding the IRS's "free direct e-file tax return system."
Real-World Ripple Effects
For most taxpayers, this means sticking with the status quo: either pay for tax software, use a tax preparer, or navigate the existing (and sometimes limited) free options. The bill's impact is mainly on future possibilities. It essentially ties the IRS's hands, preventing them from offering a potentially simpler, free alternative. While proponents may argue it prevents government overreach, it could also limit choices, particularly for those with simple tax situations and tighter budgets. The long-term effect? Potentially higher costs for taxpayers and a secured market for private tax prep companies.
Spending and Authority
Beyond blocking a new service, the bill also restricts funding. Section 3 prevents the Treasury Secretary from spending any money on developing or running a government-operated tax prep service without explicit Congressional authorization. This reinforces the bill's main goal: to ensure Congress has the final say on any major new IRS service, especially one that could compete with the private sector. One challenge is it may limit the IRS's ability to modernize and improve, and it leaves the door open for private companies to keep prices high, knowing there won't be a free, government-backed alternative.