IRS gets new protections for taxpayers in ‘free file’ program

The IRS on Monday announced an updated agreement with tax-preparation companies that prohibits the businesses from hiding the landing pages for the agency’s “free file” program from internet searches.

The updated agreement also removes a sentence from a 2018 memo between the IRS and the companies that had stated that the federal government has pledged not to enter the tax-return software marketplace.

The announcement of the changes comes after the free file program drew increased scrutiny from lawmakers and after the IRS directed an outside contractor to review the program.

“This updated agreement is part of a larger effort by the IRS to help taxpayers meet their tax obligations,” IRS Commissioner Charles Rettig said in a news release. “It continues to show the partnership we enjoy with the Free File partners and the commitment we both share in helping taxpayers since the program’s creation 18 years ago. The improved process will make Free File stronger and give taxpayers another reason to consider this valuable software option.”

“The IRS and [the tax-prep companies] will also continue to work together to identify and explore ways to better help low- to moderate-income taxpayers and to pursue meaningful opportunities to enhance taxpayer awareness and use of the Free File Program beyond the 2020 filing season,” Rettig added.

The free file program is a partnership between the IRS and tax-prep companies to have those companies offer free tax-filing software to low- and middle-income taxpayers. 

Lawmakers on both sides of the aisle raised concerns about the program earlier this year, after the investigative news outlet ProPublica reported that several tax-prep companies had taken steps to hide free options they offered under the program from web search results. Some progressive lawmakers would prefer the IRS to create its own free, online tax-filing service.

The amended agreement bars members of the alliance of tax-prep companies “from engaging in any practice that would bar Member’s Free File Landing Page to be excluded from an organic internet search.”

The agreement also directs the tax-prep companies, starting in February, to survey taxpayers who filed tax returns under the free-file program.

The provisions in the updated agreement are expected to be implemented at the start of the upcoming filing season, or as soon as possible.

Intuit, the maker of TurboTax, said in a blog post on its website that it “strongly supports these changes because they increase the focus on the taxpayer experience.” 

Tim Hugo, director of the Free File Inc. coalition of tax-prep companies in the program, said in a statement that “constant improvement has been a hallmark of the Free File Program for nearly two decades and we will continue to work with the IRS to improve the Program for the American taxpayers.”

– updated at 6:10 p.m.