IRS Aims for Improved Free File Program After Pushback

Dec. 30, 2019, 9:17 PM

A revised agreement with the private sector will make it easier for low- to moderate-income individuals to use an IRS program that allows them to file their taxes for free.

The Free File program came under major scrutiny earlier this year following news reports that companies in the program steered customers to paid services that should have been free. The fallout has led to lawsuits against H&R Block Inc. and TurboTax maker Intuit Inc.

The program is a partnership between the IRS and private tax software providers to offer free online tax preparation and electronic filing to individuals with incomes under $69,000. Under the updated agreement, announced by the IRS Dec. 30, companies can’t exclude their Free File landing page from an organic internet search—a practice that ProPublica revealed participants like H&R Block Inc. and Intuit Inc. were using. The change is one of several consumer protections the IRS added to the program.

“These steps will help further protect taxpayers and make important improvements to the program,” IRS Commissioner Charles Rettig said in a news release.

The changes come about two months after the IRS published the results of a review conducted by MITRE Corp.—the agency’s federally funded research and development center. MITRE confirmed some companies used coding to keep their Free File landing page out of organic searches but said it was up to the IRS to change its agreement with the private sector if it disagreed with that practice.

H&R Block in an emailed statement said it will continue to participate in Free File as recently amended for the upcoming filing season and noted that the program has undergone “many changes” since its inception.

Intuit said in a blog post that the company “strongly supports these changes because they increase the focus on the taxpayer experience.”

Other modifications in the new agreement include the removal of wording that previously prevented the government from entering the tax return software and e-file services market.

In addition, participating companies must survey taxpayers who successfully e-file returns through the Free File program and provide those results quarterly to the IRS.

They must also include a link on their websites to allow taxpayers—"at the earliest feasible point” in the tax filing process—to easily return to the Free File landing page on the IRS website if they don’t qualify for that company’s particular offer. Mitre said in its report that not qualifying for an offer could be due to different eligibility characteristics beyond the program’s income limit.

The link requirement will allow taxpayers to see if they qualify for another participant’s Free File offer.

To contact the reporter on this story: Allyson Versprille in Washington at aversprille@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com

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