PODCAST. May 10, 2019.
“Accountability for the IRS and its Free File Program”
New PSI Memo Reveals Failure of Oversight by the IRS That Led to Years of Practices by Online Tax Preparation Services That May Have Resulted in Eligible Taxpayers Failing to Take Advantage of the Free File Program. >> READ MORE
Did you know that Americans who made $69,000 or less in 2019 ($72k in 2020)can access free filing services through the IRS program “Free File”.
WASHINGTON, DC – U.S. Senators Rob Portman (R-OH) and Tom Carper (D-DE), the Chairman and Ranking Member of the Permanent Subcommittee on Investigations (PSI), unveiled a new bipartisan staff memo that found there has been little IRS oversight of the Free File program, which provides free online tax preparation and filing services to U.S. taxpayers. As a result, American taxpayers, who are eligible for free tax filing through the Internal Revenue Service (IRS), may not be aware of the program or taking advantage of it. This could result in eligible taxpayers paying fees to file their taxes.
Over the course of a year-long investigation, the Subcommittee examined the history of the IRS Free File program, the coordination between the Free File Alliance (FFA) and its membership of tax preparation software companies, oversight of the Free File program by IRS, and reporting in 2019 that certain FFA members used coding to hide their Free File websites from online search engines.
Ahead of the July 15th tax filing deadline, Senators Portman and Carper want to ensure that Americans who made $69,000 or less in 2019 know that they can access the free filing services to which they are entitled by visiting www.irs.gov/FreeFile.
“The PSI Staff Memo documents a lack of oversight for years by the IRS of the Free File program. This lack of oversight resulted in confusion, including where users should start the Free File experience and whether Free File websites should appear in online searches. 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 the July 15 tax filing deadline approaches, eligible taxpayers should take full advantage of IRS Free File products in filing their taxes,” said Senator Portman.
“It shouldn’t be the case that Americans who are eligible to file their taxes for free end up paying substantial fees each year, but our bipartisan investigation makes clear that is what is happening,” said Senator Carper. “Our Subcommittee found that, since the IRS entered into an agreement with tax preparation companies like H&R Block and Intuit (TurboTax) in 2002, there has been little oversight by the IRS into its Free File program. This has resulted in American taxpayers eligible for free tax filing either paying too much or never finding free services — often due to practices of private companies looking to profit off of filing season. Today, ahead of the tax filing deadline, which has been extended to July 15 due to the unprecedented pandemic, I want to make clear to all Delawareans and Americans across the country with an income of $69,000 or less: you can file your taxes for free at irs.gov/FreeFile. Looking ahead, my memo with Senator Portman stresses the importance of Congress providing the IRS with the resources it needs to improve oversight and the Free File program to ensure it better serves eligible Americans as Congress intended. Over 100 million taxpayers are eligible for Free File and they shouldn’t pay a penny more than they have to this tax season.”
Key findings of the memo include:
1. Until recently, the IRS conducted little oversight of the Free File program.
2. Three different independent entities have reviewed the Free File program since 2018 and provided recommendations for improvement, but the program continues to struggle to serve eligible taxpayers.
3. For the first 15 years of the Free File program, the IRS declined to take a position on whether FFA companies should index Free File websites to appear in online search engines, nor did FFA companies seek guidance from the IRS on whether their indexing practices complied with the MOU. As a result, participating FFA companies took different approaches in deciding whether to code their Free File program websites to appear in organic search engine results, or to have users access the Free File program only through the IRS website. Five companies (H&R Block, Intuit, TaxHawk, Drake, and TaxSlayer) coded their Free File websites in a way that prevented a search engine from including the websites in organic search results (or “non-indexed”). In doing so, all five companies believed they were complying with the MOU that governs the Free File program. The IRS and FFA companies executed an addendum to the MOU in December 2019 that clarified Free File websites should be indexed.
4. Three companies (TaxHawk, Drake, and TaxSlayer) non-indexed their Free File websites from the start of their participation in the Free File program. H&R Block non-indexed its Free File website in 2018 in response to a technical issue after determining the MOU did not require the website be indexed. In 2018, Intuit changed the name of its Free File program in an attempt to avoid consumer confusion and non-indexed the landing page of its renamed Free File offering.
5. According to an analysis performed by MITRE, approximately 85 percent of the visits made to FFA member web sites and IRS.gov from Google, the most popular online search engine, were made through links included in advertisements placed by FFA members to promote commercial products that may charge fees. Only a fraction of total visits – approximately 56,000 out of 12 million – went directly from Google to the website for an FFA member’s Free File product.
6. A lack of investment in marketing by the IRS likely led to a lack of consumer awareness that hampered participation in the Free File program