Filing taxes can be a major pain, especially with many services charging hundreds of dollars. You might be wondering why the Internal Revenue Service doesn’t just make their own program to help, but it’s complicated.
In 2002, the IRS made an agreement with tax software companies — like H&R Block and TurboTax — known as the Free File Program. This agreement let Americans making under $66,000 per year access tax software companies’ systems for free. However, the IRS agreed to not make its own competing software.
A controversial provision to the Taxpayer First Act would’ve made that agreement permanent by making it illegal for the IRS to develop their own software. Now, it seems that won’t be a part of the bill, according to Gizmodo.
It’s not hard to see why the tax industry would want to ban the IRS from creating its own free, online system. Nobody is going to dish out hundreds of dollars to a third-party if you can file directly through the government.
Although this decision doesn’t repeal the Free File Program, that agreement has recently come under scrutiny. The program has had notoriously low use. Despite 70 percent of taxpayers being eligible, only 3 percent of eligible people use it.
It’s easy to say people just don’t know about the program, but recent reports have found that’s not exactly the case. In April, ProPublica found that TurboTax deliberately hides its free program from Google search results through code. Tax companies were also found to have advised employees against referring customers to free file products.
In May, the IRS announced in a statement that they are reviewing the Free File Program.
“The IRS continues to believe it’s critical to provide wide access to free electronic filing of tax returns, particularly for low-income households. The IRS will take fast action to ensure the integrity of the program,” the IRS wrote.
It’s unclear what will come from the IRS’ review. However, as low-income families continue to pay the price, it’s clear that an overhaul of America’s tax system is long overdue.