IRS-Commissioned Study Finds Flaws in Public-Private Free File Partnership, But It's Still Cheaper Than Doing In-House

Chris Gaetano
Published Date:
Oct 9, 2019

A study commissioned by the IRS found that the public-private partnership with for-profit tax software firms to provide free filing options for taxpayers is seldom used, at least partially due to the companies actively steering people away from them, according to the Wall Street Journal

The partnership, called the Free File Alliance, is meant to provide free tax preparation services to anyone making less than $66,000 a year, which is potentially 100 million taxpayers. The report found, however, that the number of actual users is closer to 3 million. One reason, according to the report, was that not enough members of the public know about the program. The firms themselves weren't helping this matter, as the report also said that five of the 12 Free File members used coding that, in effect, hid the option from consumer searches. This echoes comments from former IRS Taxpayer Advocate Nina Olson, who said in a recent report that the IRS does not promote or advertise the program at all; ProPublica laid a similar charge on the firms, saying that there is evidence of deliberate underpromotion of these free options in order to steer people to paid ones. 

Despite these problems, the report concluded the program was still worth it, because the IRS developing a free file program of its own could potentially be very expensive. Outsourcing this option to private firms, the report believed, was a way to do so affordably. 

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