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To inject balance into the assessment of the Free File Program by citing MITRE and Senator Portman, and to correct factual errors.
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Through the program, 70% of U.S. taxpayers are eligible to use commercial software for free to file their tax returns, though less than 5% of eligible individuals do so. In 2019, investigations by [[ProPublica]] asserted that companies such as [[Intuit]] (makers of TurboTax) and [[H&R Block]] allegedly misled taxpayers into paying for tax preparation services despite qualifying under the Free File Program.<ref>{{Cite web|url=https://www.propublica.org/article/turbotax-deliberately-hides-its-free-file-page-from-search-engines|title=TurboTax Deliberately Hid Its Free File Page From Search Engines|last=Justin Elliott|first=Lucas Waldron|date=2019-04-26|website=ProPublica|language=en|access-date=2021-02-25}}</ref><ref>{{Cite web|url=https://www.propublica.org/article/turbotax-military-discount-trick-troops-paying-to-file-taxes|title=TurboTax Uses A "Military Discount" to Trick Troops Into Paying to File Their Taxes|last=Justin Elliott|first=Kengo Tsutsumi|date=2019-05-23|website=ProPublica|language=en|access-date=2019-05-23}}</ref> Subsequent investigations by the [[United States Senate Committee on Homeland Security and Governmental Affairs|Senate Committee on Homeland Security and Governmental Affairs]] and the [[New York State Department of Financial Services]] confirmed these findings.<ref>{{cite report |author=United States Senate Homeland Security Permanent Subcommittee on Investigations |author-link=United States Senate Homeland Security Permanent Subcommittee on Investigationss |date=2020 |title=IRS Oversight of the Free File Program |url=https://www.documentcloud.org/documents/6939865-PSI-Staff-Memo-Free-File.html}}</ref><ref>{{Cite web|url=https://www.propublica.org/article/senate-investigation-criticizes-the-irs-for-failing-to-oversee-free-filing-program|title=Senate Investigation Criticizes the IRS for Failing to Oversee Free Filing Program|last=Elliott|first=Justin|date=2020-06-09|website=ProPublica|language=en|access-date=2021-02-25}}</ref><ref>{{Cite web|url=https://www.propublica.org/article/turbotax-tricked-customers-into-paying-to-file-taxes-now-several-states-are-investigating-it|title=TurboTax Tricked Customers Into Paying to File Taxes. Now Several States Are Investigating It.|last=Elliott|first=Justin|date=2019-12-19|website=ProPublica|language=en|access-date=2019-12-30}}</ref><ref>{{Cite web|url=https://www.propublica.org/article/the-ftc-is-investigating-intuit-over-turbotax-practices|title=TurboTax Tricked Customers Into Paying to File Taxes. Now Several States Are Investigating It.|last=Elliott|first=Justin|date=2020-09-08|website=ProPublica|language=en|access-date=2021-02-25}}</ref>
Through the program, 70% of U.S. taxpayers are eligible to use commercial software for free to file their tax returns, though less than 5% of eligible individuals do so. In 2019, investigations by [[ProPublica]] asserted that companies such as [[Intuit]] (makers of TurboTax) and [[H&R Block]] allegedly misled taxpayers into paying for tax preparation services despite qualifying under the Free File Program.<ref>{{Cite web|url=https://www.propublica.org/article/turbotax-deliberately-hides-its-free-file-page-from-search-engines|title=TurboTax Deliberately Hid Its Free File Page From Search Engines|last=Justin Elliott|first=Lucas Waldron|date=2019-04-26|website=ProPublica|language=en|access-date=2021-02-25}}</ref><ref>{{Cite web|url=https://www.propublica.org/article/turbotax-military-discount-trick-troops-paying-to-file-taxes|title=TurboTax Uses A "Military Discount" to Trick Troops Into Paying to File Their Taxes|last=Justin Elliott|first=Kengo Tsutsumi|date=2019-05-23|website=ProPublica|language=en|access-date=2019-05-23}}</ref> Subsequent investigations by the [[United States Senate Committee on Homeland Security and Governmental Affairs|Senate Committee on Homeland Security and Governmental Affairs]] and the [[New York State Department of Financial Services]] confirmed these findings.<ref>{{cite report |author=United States Senate Homeland Security Permanent Subcommittee on Investigations |author-link=United States Senate Homeland Security Permanent Subcommittee on Investigationss |date=2020 |title=IRS Oversight of the Free File Program |url=https://www.documentcloud.org/documents/6939865-PSI-Staff-Memo-Free-File.html}}</ref><ref>{{Cite web|url=https://www.propublica.org/article/senate-investigation-criticizes-the-irs-for-failing-to-oversee-free-filing-program|title=Senate Investigation Criticizes the IRS for Failing to Oversee Free Filing Program|last=Elliott|first=Justin|date=2020-06-09|website=ProPublica|language=en|access-date=2021-02-25}}</ref><ref>{{Cite web|url=https://www.propublica.org/article/turbotax-tricked-customers-into-paying-to-file-taxes-now-several-states-are-investigating-it|title=TurboTax Tricked Customers Into Paying to File Taxes. Now Several States Are Investigating It.|last=Elliott|first=Justin|date=2019-12-19|website=ProPublica|language=en|access-date=2019-12-30}}</ref><ref>{{Cite web|url=https://www.propublica.org/article/the-ftc-is-investigating-intuit-over-turbotax-practices|title=TurboTax Tricked Customers Into Paying to File Taxes. Now Several States Are Investigating It.|last=Elliott|first=Justin|date=2020-09-08|website=ProPublica|language=en|access-date=2021-02-25}}</ref>


⚫
As of the 2021 tax filing season, the two most used tax-filing software programs (TurboTax and H&R Block) no longer participate in the Free File Program. With the two largest members of the Free File Alliance ending their participation in the Free File Program, there have been renewed calls for the IRS to develop and offer their own free tax-filing software to taxpayers.<ref>https://www.vox.com/policy-and-politics/22596072/irs-turbotax-hr-block-free-file-tax-return</ref>
However, the MITRE Corporation, a federally funded research and development company, examined the Free File Program in 2019, and concluded: "[S]ome actions by FFI members that critics have called deceptive are indeed common, legal business practices used in the private sector to improve brand recognition, increase exposure to new customers, and to highlight new products." Furthermore, MITRE stated: "The benefits of engaging in the current public-private partnership with the [Free File] Alliance appear to be substantial. . . . The [IRS] Agreement with the Free File Alliance allows IRS to pass on the substantial cost of developing and implementing the e-filing program to the private sector, while at the same time providing greater consumer choice and promoting competition in the tax preparation industry."

Indeed, U.S. Sen. Rob Portman (R-OH), then Chairman of the aforementioned Senate Permanent Subcommittee on Investigations (a Subcommittee of the Homeland Security and Governmental Affairs Committee) agreed that the Free File Program serves a very important purpose. In a June 11, 2020, statement released with the PSI report, he said: "I am encouraged that the IRS and Free File member companies have addressed these issues and are working to increase awareness of this important public-private partnership."

⚫
As of the 2021 tax filing season, the two most used tax-filing software programs (TurboTax and H&R Block) no longer participate in the Free File Program. With the two largest members of the Free File Alliance ending their participation in the Free File Program, there have been renewed calls for the IRS to develop and offer their own free tax-filing software to taxpayers.<ref>https://www.vox.com/policy-and-politics/22596072/irs-turbotax-hr-block-free-file-tax-return</ref> However, the proponents of this proposal have not acknowledged the billions of dollars that would be needed for IRS to create, implement, maintain and update such a tax-filing system. Furthermore, as National Taxpayer Advocate Erin Collins testified before Congress in 2022, IRS today is still digging out from a backlog of more than 20 million federal income tax returns due to the agency shutting down during the COVID-19 pandemic and in 2021 was able to answer only 11 percent of taxpayer calls to IRS.


== History ==
== History ==
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One initiative, IRS Free File, instructed the IRS to provide free and secure online tax return preparation and filing services to taxpayers. In accordance with this OMB directive, the IRS began working in partnership with the tax software industry to develop a solution. The result was the formation of the Free File Alliance, LLC, a group of tax software companies who provide free commercial online tax preparation and electronic filing services.<ref name="About the Free File Alliance">{{cite web |title=About the Free File Alliance |publisher=[[Internal Revenue Service|IRS]] |url=https://www.irs.gov/efile/article/0,,id=200979,00.html |archiveurl=https://web.archive.org/web/20110629010409/https://www.irs.gov/efile/article/0%2C%2Cid%3D200979%2C00.html |archivedate=2011-06-29 |url-status=dead }}</ref>
One initiative, IRS Free File, instructed the IRS to provide free and secure online tax return preparation and filing services to taxpayers. In accordance with this OMB directive, the IRS began working in partnership with the tax software industry to develop a solution. The result was the formation of the Free File Alliance, LLC, a group of tax software companies who provide free commercial online tax preparation and electronic filing services.<ref name="About the Free File Alliance">{{cite web |title=About the Free File Alliance |publisher=[[Internal Revenue Service|IRS]] |url=https://www.irs.gov/efile/article/0,,id=200979,00.html |archiveurl=https://web.archive.org/web/20110629010409/https://www.irs.gov/efile/article/0%2C%2Cid%3D200979%2C00.html |archivedate=2011-06-29 |url-status=dead }}</ref>


According to investigations by the news organization [[ProPublica]],<ref>[https://www.propublica.org/series/the-turbotax-trap The TurboTax Trap: How the Tax Prep Industry Makes You Pay]</ref> TurboTax maker [[Intuit]] allegedly engaged in practices that hid the Free File Program from eligible taxpayers, and attempted to trick eligible taxpayers into paying for services they might be eligible to receive for free. However, as noted, the MITRE Corporation, in studying the Free File Program, concluded that some actions of FFI members were "common, legal business practices used in the private sector." Indeed, the underlying issue -- whether FFI members could non-index their Free File webpages from online search engines -- had never been addressed in the memorandum of understanding that governs the Program. FFI members believed that their Free File tax offerings could only be made available and accessed through the main IRS.gov website. In 2019, the IRS and FFI members agreed that, moving forward, participating companies would not non-index their Free File webpages from online search engines. Thus, taxpayers may access Free File members' free offerings either through the main IRS.gov website or through online search engine results.
According to investigations by the news organization [[ProPublica]],<ref>[https://www.propublica.org/series/the-turbotax-trap The TurboTax Trap: How the Tax Prep Industry Makes You Pay]</ref> TurboTax maker [[Intuit]] allegedly engaged in practices that hid the Free File Program from eligible taxpayers, and attempted to trick eligible taxpayers into paying for services they might be eligible to receive for free.


In 2020, H&R Block ended its participation in the Free File Program.<ref>https://news.bloombergtax.com/daily-tax-report/irss-free-file-partners-moving-forward-without-h-r-block</ref> In July 2021, Intuit announced that its TurboTax product would no longer participate in the Free File Program effective as of the 2021 tax season.<ref>https://www.cnbc.com/2021/07/16/intuit-will-no-longer-participate-in-an-irs-free-tax-filing-program-.html</ref> For tax-filing season 2022, eight tax software companies are participating in the Free File Program.
In 2020, H&R Block ended its participation in the Free File Program.<ref>https://news.bloombergtax.com/daily-tax-report/irss-free-file-partners-moving-forward-without-h-r-block</ref> In July 2021, Intuit announced that its TurboTax product would no longer participate in the Free File Program effective as of the 2021 tax season.<ref>https://www.cnbc.com/2021/07/16/intuit-will-no-longer-participate-in-an-irs-free-tax-filing-program-.html</ref> For tax-filing season 2022, eight tax software companies are participating in the Free File Program.

Revision as of 01:54, 15 March 2022

The IRS Free File Program is a service that allows U.S. taxpayers to prepare and e-file their federal income tax returns for free. Through the program, commercial tax software companies that are part of the Free File Alliance offer free tax preparation software to tax filers with annual adjusted gross income (AGI) below $73,000 for Tax Year 2021. The AGI is adjusted and typically increases slightly for each tax-filing season. [1][2] The service is available through the IRS's website at www.irs.gov/freefile. Fillable forms also are available to all taxpayers as part of the Free File Program.

More than 65 million American taxpayers have used Free File since its inception in 2003. Using a conservative savings estimate of $30 per return, the IRS Free File Program has saved taxpayers nearly $2 billion that they otherwise would have spent for tax preparation during this period.

Through the program, 70% of U.S. taxpayers are eligible to use commercial software for free to file their tax returns, though less than 5% of eligible individuals do so. In 2019, investigations by ProPublica asserted that companies such as Intuit (makers of TurboTax) and H&R Block allegedly misled taxpayers into paying for tax preparation services despite qualifying under the Free File Program.[3][4] Subsequent investigations by the Senate Committee on Homeland Security and Governmental Affairs and the New York State Department of Financial Services confirmed these findings.[5][6][7][8]

As of the 2021 tax filing season, the two most used tax-filing software programs (TurboTax and H&R Block) no longer participate in the Free File Program. With the two largest members of the Free File Alliance ending their participation in the Free File Program, there have been renewed calls for the IRS to develop and offer their own free tax-filing software to taxpayers.[9]

History

In November 2001, the U.S. Office of Management and Budget's (OMB) Quicksilver Task Force established 24 e-government initiatives that were a part of the President's Management Agenda. These initiatives were designed to improve Government to Government, Government to Business, and Government to Citizen electronic capabilities.[10]

One initiative, IRS Free File, instructed the IRS to provide free and secure online tax return preparation and filing services to taxpayers. In accordance with this OMB directive, the IRS began working in partnership with the tax software industry to develop a solution. The result was the formation of the Free File Alliance, LLC, a group of tax software companies who provide free commercial online tax preparation and electronic filing services.[10]

According to investigations by the news organization ProPublica,[11] TurboTax maker Intuit allegedly engaged in practices that hid the Free File Program from eligible taxpayers, and attempted to trick eligible taxpayers into paying for services they might be eligible to receive for free.

In 2020, H&R Block ended its participation in the Free File Program.[12] In July 2021, Intuit announced that its TurboTax product would no longer participate in the Free File Program effective as of the 2021 tax season.[13] For tax-filing season 2022, eight tax software companies are participating in the Free File Program.

Free File Alliance

Main article: Free File Alliance

The Free File Alliance is a consortium of commercial tax preparation software providers that offer their brand-name tax software products for free to lower and middle-income tax filers. Each member is allowed to set eligibility requirements for their software products. However, the cumulative offers must allow 70 percent of U.S. taxpayers - approximately 100 million people - to be eligible for at least one product.[14] Each year, the income limit for eligibility is adjusted to reach 70 percent of the taxpayers. The income limit for 2022 (tax year 2021) is set at $73,000, though some Free File software providers choose to set the income threshold lower. Agreements between the IRS and the Free File Alliance are publicly available.[10] The latest Memorandum of Understanding was signed in 2021 and runs through 2023.[15]

Free File Software

The Free File Program, a public-private partnership between IRS and private-sector tax software companies, allows lower- and middle-income taxpayers to use name-brand tax preparation software to prepare and file tax forms for free.

For 2022, anyone whose adjusted gross income is $73,000 or less will be eligible for at least one software product. There are 8 products from which to choose. Each software provider sets its own eligibility requirements, generally related to income, state residency, age, military service or eligibility for the earned income tax credit. Free File is free for federal tax returns only. However, some Free File Alliance members offer state return software for a fee or for free. Most of the software products, but not all, use an interview format in which you are asked questions and your answers are used to populate the electronic form. This format helps taxpayers get the tax credits and deductions to which they are eligible. It also means taxpayers do not have to be experts in income tax law. Alliance members cannot sell any refund anticipation loan products through the Free File service.

To use IRS Free File, taxpayers generally go through the IRS website at www.irs.gov/freefile. There, taxpayers can find a tax software product one of two ways. They can review a list of companies and their offers. Or, they can use a simple web tool that asks a few questions - such as income, state residency and age - and the tool will locate those software products for which taxpayers are eligible. Once a taxpayer chooses a product, they will be directed off the IRS.gov site and onto the Alliance member's website to complete their federal tax return.[16]

Taxpayers can also access the free file option of the participating software companies by accessing the direct links below. For tax year 2021, there are 8 participating Free File Alliance members with the following requirements to qualify to use their software for free under the Free File program:[17]

  • FreeTaxUSA.com, AGI of $41,000 or less. Free state return included.
  • OnLineTaxes.com, AGI between $16,000 and $73,000. Free state return included.
  • TaxAct.com, AGI of $65,000 or less, and age 56 or younger. Free state return in some states.
  • TaxSlayer.com, AGI of $39,000 or less. Free state return in some states.
  • FileYourTaxes.com, AGI between $9,500 and $73,000, and age 65 or younger. Free state return in some states.
  • 1040NOW.com, AGI of $73,000 or less, and living in certain states. No free state returns.
  • Free1040TaxReturn.com, AGI of $73,000 or less, and living in certain states. No free state returns.
  • ezTaxReturn.com, AGI of $73,000 or less, and living in certain states. No free state returns.

Free File Fillable Forms

Another component of Free File is Free File Fillable Forms, which is available to all taxpayers, including taxpayers whose adjusted gross incomes (AGI) are greater than $73,000. It is an alternative to Free File Software, although both are free. Free File Fillable Forms is operated by a private organization, the Free File Alliance and not the IRS. Though IRS links to it, they do not endorse it or any product.[18][19][20][21][22]

Free File Fillable Forms is an electronic version of IRS paper forms. Free File Fillable Forms does not include any elaborate cross-checking or question-and-answer formats (such as is found in many of the Free File Software packages), instead it is a simple fill-in-the blank format (however, it does perform math calculations). Free File Fillable Forms is best for taxpayers who are comfortable preparing their own tax returns or who have been long-time paper filers. There are no income restrictions for using Free File Fillable Forms. It does not support any state tax returns.[23][24][25][26][27]

References

  1. ^ IRS.gov, www.irs.gov/freefile
  2. ^ "About the Free File Program". irs.gov. Internal Revenue Service. Retrieved 2016-09-04.
  3. ^ Justin Elliott, Lucas Waldron (2019-04-26). "TurboTax Deliberately Hid Its Free File Page From Search Engines". ProPublica. Retrieved 2021-02-25.
  4. ^ Justin Elliott, Kengo Tsutsumi (2019-05-23). "TurboTax Uses A "Military Discount" to Trick Troops Into Paying to File Their Taxes". ProPublica. Retrieved 2019-05-23.
  5. ^ United States Senate Homeland Security Permanent Subcommittee on Investigations (2020). IRS Oversight of the Free File Program (Report).
  6. ^ Elliott, Justin (2020-06-09). "Senate Investigation Criticizes the IRS for Failing to Oversee Free Filing Program". ProPublica. Retrieved 2021-02-25.
  7. ^ Elliott, Justin (2019-12-19). "TurboTax Tricked Customers Into Paying to File Taxes. Now Several States Are Investigating It". ProPublica. Retrieved 2019-12-30.
  8. ^ Elliott, Justin (2020-09-08). "TurboTax Tricked Customers Into Paying to File Taxes. Now Several States Are Investigating It". ProPublica. Retrieved 2021-02-25.
  9. ^ https://www.vox.com/policy-and-politics/22596072/irs-turbotax-hr-block-free-file-tax-return
  10. ^ a b c "About the Free File Alliance". IRS. Archived from the original on 2011-06-29.
  11. ^ The TurboTax Trap: How the Tax Prep Industry Makes You Pay
  12. ^ https://news.bloombergtax.com/daily-tax-report/irss-free-file-partners-moving-forward-without-h-r-block
  13. ^ https://www.cnbc.com/2021/07/16/intuit-will-no-longer-participate-in-an-irs-free-tax-filing-program-.html
  14. ^ "Do Your Federal Taxes For Free" (PDF). irs.gov. Internal Revenue Service. Retrieved 2016-09-04.
  15. ^ "Free File Alliance & IRS Sign Five-Year Agreement to Continue Free File Program". freefilealliance.org. March 18, 2015. Retrieved 2016-09-04.
  16. ^ "Free File: I Will Choose A Free File Software". irs.gov. Internal Revenue Service. Retrieved 2016-09-04.
  17. ^ "IRS Free File | Internal Revenue Service".
  18. ^ https://www.freefilefillableforms.com
  19. ^ Before Starting Free File Fillable Forms https://www.irs.gov/e-file-providers/before-starting-free-file-fillable-forms
  20. ^ Free File: Do Your Federal Taxes for Free https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free
  21. ^ Free File Fillable Forms General FAQs https://www.irs.gov/pub/irs-utl/2012_4f_faqs.pdf
  22. ^ "IRS, Free File Alliance announce changes to improve program" https://www.irs.gov/newsroom/irs-free-file-alliance-announce-changes-to-improve-program-improved-taxpayer-options-available-for-2019-free-file-program
  23. ^ https://www.freefilefillableforms.com
  24. ^ Before Starting Free File Fillable Forms https://www.irs.gov/e-file-providers/before-starting-free-file-fillable-forms
  25. ^ Free File: Do Your Federal Taxes for Free https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free
  26. ^ Free File Fillable Forms General FAQs https://www.irs.gov/pub/irs-utl/2012_4f_faqs.pdf
  27. ^ "IRS, Free File Alliance announce changes to improve program" https://www.irs.gov/newsroom/irs-free-file-alliance-announce-changes-to-improve-program-improved-taxpayer-options-available-for-2019-free-file-program
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