Washington — For over 15 years, CCIA has supported a public-private partnership between the Internal Revenue Service (IRS) and tax preparation software companies to provide free tax software to lower- and moderate-income taxpayers. We have sponsored hundreds of local events, in partnership with local non-profit groups, to make sure taxpayers know they do not have to pay to use popular tax software if they are among the 100 million taxpayers who qualify for the Free File program.
Free File was a new innovation created through an open, public process in 2002 that would allow people who still prepared their taxes on paper forms free access to the latest technology. Well known tax software companies made their products available free to most taxpayers, the IRS oversaw the program to insure consumers were protected, and the government would not pay a dime for the software.
Since it was created, 53 million Americans have used the Free File program to file their tax returns for free. This has saved them an estimated $1.6 billion they would have otherwise paid for tax preparation services.
Periodically, the IRS has sought independent reviews of the Free File program from an outside researcher, the not-for-profit MITRE Corporation, to insure Free File is living up to its mission to serve taxpayers and has improved over time. A new review was conducted this summer (2019) in response to criticisms raised about the Free File program.
The independent MITRE report found that the Free File program and the IRS Voluntary Income Tax Assistance (VITA) program each provide free tax preparation services to between 2.5 and 3 million taxpayers every year. MITRE also found that Free File offerings to taxpayers had “exceptional user experience, intuitive mobile experiences, and followed the MOU’s guidance related to taxpayer experience and usability.”
MITRE also found that, contrary to claims that Free File should be serving 70 million taxpayers annually, the actual maximum number of those likely to take advantage of the program was between 27 and 28 million. MITRE discovered this is because of choices taxpayers make about how they file their taxes. For instance, over 50 million use paid preparers; 18 million already get free returns from commercial tax software companies; 9 million still choose to use paper and pencil and millions more use programs like the IRS’s free Tax Counseling for the Elderly (TCE) program and free options for members of the military offered on base. Free File is just one of many options and choices taxpayers have to receive access to free online tax preparation.
The report does make several suggestions for how the IRS could improve the Free File program by making the finding and using of Free File offerings easier. As with any program, there is always room for improvement, and CCIA supports the IRS in considering those recommendations.
The criticisms of the Free File program are driven by a larger ideological issue over whether to keep control of tax returns in the hands of taxpayers — or whether the government should instead do taxes for people based on limited information it has in government computers and then leave it taxpayers to appeal any errors to the IRS. We know most people do not want such a system, because we’ve been asking them for years. American voters oppose the idea of government preparing their tax returns by over 2-1.
Innovative public-private partnerships like the Free File program seem like a too successful obstacle to those who want the IRS to take over the entire tax preparation process. This is actually something IRS likely could never successfully achieve anyway.
While there is plenty of criticism and disagreement about how to make the tax system more fair, there is widespread, bipartisan agreement that taxpayers distrust giving the government more control over determining what tax breaks they receive and how much tax they ultimately pay. The independent MITRE review found that Free File is working as designed and in the taxpayer’s interest.