The FAIR PREP Act prohibits the IRS from preparing tax returns or operating the Direct File program, which currently allows qualified taxpayers in 25 states to file free federal returns directly through the IRS website. The bill preserves the Free File program using third-party software and VITA volunteer assistance. Treasury cannot fund development of any IRS electronic tax preparation service.
Latest Action
Referred to the House Committee on Ways and Means.
AI Summary
Plain-English explanation of this bill
The FAIR PREP Act prohibits the IRS from preparing tax returns or operating the Direct File program, which currently allows qualified taxpayers in 25 states to file free federal returns directly through the IRS website. The bill preserves the Free File program using third-party software and VITA volunteer assistance. Treasury cannot fund development of any IRS electronic tax preparation service.
Last updated: 12/30/2025
Official Summary
Congressional Research Service summary
<p><strong>Fostering Autonomy in Independent Returns by Prohibiting Redundant and Extralegal Programs Act of 2025 or the FAIR PREP Act of 2025</strong></p><p>This bill prohibits the Internal Revenue Service (IRS) from preparing federal tax returns or refund claims, with some exceptions. The bill specifically prohibits the preparation of federal income tax returns or refund claims through the IRS’s Direct File program. (The Direct File program currently allows qualified taxpayers in 25 participating states to prepare and electronically file free federal tax returns through a portal on the IRS’s website.)</p><p>The bill defines <em>prepare</em> with respect to federal tax returns and refund claims as (1) the completion (in whole or in part) of any form or schedule for the purpose of calculating federal taxes or refunds, and (2) the filing (either electronically or on paper) of such federal tax returns or refund claims.</p><p>However, under the bill, federal and state tax returns and refund claims may be prepared through the IRS’s Free File program (a program that allows certain taxpayers to prepare and file free federal and state income tax returns using third-party tax-preparation software) or the Volunteer Income Tax Assistance grant program (through which the IRS partners with local community organizations to help low-income and disabled individuals and persons with limited English proficiency prepare and file free federal and state income tax returns).</p><p> Further, the Department of the Treasury may not award grants or enter into contracts or other transactions for the development or operation of an electronic tax preparation service. </p>
Key Points
Main provisions of the bill
Prohibits IRS from preparing federal tax returns
Eliminates IRS Direct File program
Preserves Free File program with third-party software
Maintains VITA volunteer tax assistance program
Blocks Treasury from funding IRS tax prep development
Protects commercial tax preparation industry
How This Impacts Americans
Potential effects on citizens and communities
This bill would eliminate the IRSs new Direct File program, which launched as a pilot in 2024 allowing free direct filing for simple returns. Proponents argue it protects taxpayer privacy and maintains competition in tax preparation. Critics contend it removes a free option that could save millions of taxpayers money on preparation fees. The bill reflects ongoing debate about whether the IRS should directly compete with commercial tax software companies like TurboTax and H&R Block.
Policy Areas
Primary Policy Area
Taxation
Scope & Jurisdiction
Jurisdiction Level
federal
Congressional Session
119th Congress
Citation Reference
451, 119th Congress (2025). "FAIR PREP Act of 2025". Source: Voter's Right Platform. https://votersright.org/bills/118-hr-451
