AI Firm Launches Free Tax Filing After IRS Program Ends
Artificial intelligence firm Prime Meridian has launched a free tax-filing service for the 2025 season, directly targeting the market gap created by the discontinuation of the IRS's Direct File program. The Palo Alto-based company, backed by venture capital firms General Catalyst, Belief Capital, and Calibration Capital, aims to process at least tens of thousands of returns this year. At launch, the service can handle basic filings for full-time workers and more complex situations involving contractors, business owners, and investment income such as K-1s and 1099s.
To ensure its integrity, Prime Meridian is advised by former IRS Commissioner Danny Werfel. He stipulated three conditions for his involvement: the core service must be genuinely free, the company cannot harvest user data for commercial use, and its AI must recognize its limitations to prevent errors on complex returns. While the core tax product will remain free, the company stated it may introduce paid products in the future across banking and investing.
Launch Capitalizes on 25% IRS Workforce Reduction
The new service enters the market as the Internal Revenue Service grapples with significant operational constraints. The agency's workforce has declined by more than 25%, a reduction that directly impacts its customer service and enforcement capabilities. According to Werfel, this resource drain means taxpayers who encounter issues will find it more difficult to get them resolved with the IRS.
This reduction in capacity also shifts a greater financial burden onto compliant taxpayers. With less manpower to pursue tax evasion, the government's ability to collect owed revenue is diminished. Werfel warned of the consequences of these cuts, stating that "those that choose to play by the rules will shoulder more of the burden of funding of our government." Prime Meridian's private-sector solution seeks to provide a reliable alternative as public tax services face these headwinds.
