IRS Direct File pressures Intuit

The United States tax agency is no longer just the referee in tax season. It now runs its own free filing product, and that puts it on the same screen as TurboTax when millions of people decide how to submit a return. (irs.gov) Internal Revenue Service Direct File started as a 12-state pilot in 2024, and 140,803 taxpayers used it to file federal returns during that first season. After that pilot, the Internal Revenue Service made it a permanent option. (irs.gov, irs.gov) In 2025, Direct File expanded to 24 states and covered more income types, credits, and deductions than it did in the pilot. The Internal Revenue Service’s own media guide said the service was built to make filing “quicker and easier” and kept live chat in English and Spanish. (irs.gov) That changes the economics of tax software because the basic act of sending a federal return can start to look like email: necessary, standardized, and hard to charge much for. If the government offers a free version that handles common cases, paid products have to sell something beyond the transmit button. (irs.gov, irs.gov) Intuit is still much bigger than just one filing form. In its latest annual report, the company describes products for simple returns, itemized deductions, investments, rental property, and small business owners, which is why investors watch whether pressure starts at the simple end and moves upward. (investors.intuit.com) The scale of the market explains why this matters. The Internal Revenue Service said on January 26, 2026 that it expected about 164 million individual returns for tax year 2025 before the April 15 deadline. (irs.gov) The Internal Revenue Service also said more than half of taxpayers use a tax professional to prepare and file returns. That leaves a huge middle ground between full do-it-yourself software and hiring an accountant, and that is the part of the market most exposed if free government filing keeps improving. (irs.gov) Free filing was already getting broader before Direct File scaled up. On March 10, 2026, the Internal Revenue Service said its Free File program could support returns with credits, deductions, and business expenses, and that guided software was available to taxpayers with adjusted gross income of $89,000 or less in 2025. (irs.gov) That pushes tax companies toward a different pitch: not “we can file this for you,” but “we can tell you what to do before you file.” A return is a record of what already happened, while tax planning is the part that changes what happens next year. (irs.gov, irs.gov) So the pressure on Intuit is not just that the government built a free form. It is that every improvement in Direct File makes filing itself look more like a commodity, while the higher-margin work shifts toward advice, optimization, and year-round financial software. (irs.gov, investors.intuit.com)