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Audit: Taxpayers Bypass Complex, Confusing Free File Software

irs 1040 tax form with a computer keyboard
(Dreamstime)

By    |   Thursday, 06 February 2020 09:40 PM

More than 14 million taxpayers last year paid for tax prep software they could have gotten free, ProPublica reported.

Citing an audit by the Treasury Inspector General for Tax Administration, the nonprofit investigative journalism outlet said its analysis showed what taxpayers laid out amounted to roughly a billion dollars in revenue for TurboTax maker Intuit, H&R Block and other tax software companies.

Around 104 million taxpayers were eligible for Free File last year, according to the audit. Of those, 2.4% used the free government program.

Of the remaining 101.5 million, 67 million did not use tax software, with most going to bricks-and-mortar tax prep services. 

The remaining 34.5 million used software to do their taxes, and of those, 14 million paid for tax prep they could have received for free. 

The audit found the reason so few taxpayers use the Free File program, a public-private partnership between the IRS and companies such as Intuit and H&R Block, is because of the confusing design and complexity of the program — and lax oversight by the IRS, Pro Publica reported.

"The process to participate in the Free File Program is fraught with complexity and confusion," the audit states. "IRS management seems unaware of the complexity and confusion taxpayers face."

The report urges the IRS to take a number of steps to address the Free File program's shortcomings. For example, the report suggested the IRS should boost its oversight to make sure the companies are following the program's rules, add a way for taxpayers to submit complaints about the program and more carefully track the program's performance.

In a statement, Sen. Ron Wyden, D-Ore., the ranking minority member on the Senate Finance Committee and a supporter of making tax filing cheaper and easier, said the inspector general's findings show "the Free File program is a mess."

"Recent IRS reforms to the program do right by taxpayers," Wyden said, adding "The IRS must be vigilant in enforcing these reforms, and Congress must provide the IRS the resources to develop a free public service."

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Last year, more than 14 million taxpayers paid for tax prep software they could have gotten free, according to ProPublica.
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2020-40-06
Thursday, 06 February 2020 09:40 PM
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