Tax preparation firms have prevented millions of Americans from using an Internal Revenue Service program that allows them to file their taxes free of charge, according to a recent US government report.
Most taxpayers are eligible to file their tax returns free of charge through an IRS sponsored program called Free File. At least five of the 12 companies that provided free tax preparation software as part of the program used code to hide their free service from online research. This resulted in an audit by the Financial Inspector for Tax Administration (TIGTA).
The Federal Watchdog examined the free file program last spring after the nonprofit newsroom ProPublica announced that TurboTax parent Intuit, H&R Block, and other tax advisors led low-income clients to paid services that could have been provided free of charge.
The free file program that the IRS launched in 2003 is designed to allow 70% of Americans, (Anyone earning less than $ 69,000 is eligible this year.) However, the use of Free File is "unclear and complex," the Inspector General's office noted.
The only sure way for a taxpayer to file for free is through the IRS website irs.gov/freefile. However, this requirement is not mentioned in the IRS 'agreement with commercial tax advisors, and most taxpayers are unaware of it.
Last year, 104 million taxpayers met the criteria for using Free File, but only 2.5 million used it, the review said. Around a third or 35 million submitted their tax returns through a commercial website. In follow-up surveys with a sample of these taxpayers, the watchdog estimated that 14 million people paid a fee for filing their taxes if they were entitled to submit them free of charge.
A detailed flowchart shows how many clicks a person has to make to successfully complete a return via Free File.
Since Free File is mostly absent from online searches, most taxpayers may not know that the program is there. The IRS has not advertised the program since 2014. Almost 30% of low-income taxpayers who were contacted in a follow-up survey said they knew nothing about the offer or its availability.
"[T]The IRS does not provide sufficient control to ensure that the Free File program is working as intended, "the exam concludes." In addition, taxpayers are not alerted to safeguards … and have no process to report concerns. "
The report recommends a number of changes, including that the IRS advertises Free File and periodically reviews whether tax advisors adhere to the program.