Paul L. Caron
Dean




Wednesday, October 16, 2019

IRS-Commissioned Study Defends Benefits Of Free-File Program In Face Of Criticism

Wall Street Journal, IRS Tax-Prep Alliance With Private Firms Gets Fresh Scrutiny: Study Defends Free File’s Benefits as Substantial:

Free FileThe Internal Revenue Service’s partnership with private firms to provide free tax preparation to millions of filers has serious flaws but also appears to provide substantial benefits, according to an outside review commissioned by the IRS [Independent Assessment of the Free File Program (Oct. 3, 2019)]

The study, reviewed by The Wall Street Journal, responded to intense criticism of the public-private partnership, called the Free File Alliance. In theory the alliance is designed to provide free online tax-prep by a dozen companies to about 100 million filers who currently earn about $66,000 or less. Members include industry leaders such as H&R Block and Intuit, the maker of TurboTax.

But in recent years, Free File has been used by fewer than 3 million filers annually. Both the National Taxpayer Advocate and members of Congress have charged that the low usage rates signal that the program isn’t working well. Stories last spring by the nonprofit news site ProPublica drew more attention to the program’s workings. ...

Others say that commercial tax-prep companies in the alliance steer taxpayers away from Free File and into their paid commercial services. The study, conducted by the Mitre Corporation, a consulting firm that operates as an IRS research center, found that five of the 12 Free File members used coding that in effect hid their Free File landing pages from many online searches. ...

The report concluded that despite the shortcomings, the benefits of engaging in the current public-private partnership “appear to be substantial,” in part because of prohibitive costs if the IRS tried to develop its own software. ...

Critics of the Free File Alliance question the study’s conclusions. Dennis Ventry, a law professor at the University of California at Davis, said, “This report isn’t worth the paper it’s written on. For one thing, the consultant has bought the alliance’s argument that the program only needs to help taxpayers who access Free File through IRS.gov. That will be news to Congress.”

IRS Statement on Free File Program (Oct. 11, 2019):

The IRS is strongly committed to providing taxpayers with various viable options and tools, including free services, that help them effectively meet their tax obligations—whether online as currently supported by Free File or in-person as supported by the Volunteer Income Tax Assistance Program.

The IRS takes the recent concerns raised about the Free File Alliance very seriously. We hired the MITRE Corporation to conduct an independent review of the existing program. We received the independent assessment of the Free File Program and are carefully reviewing the report’s recommendations.

The IRS is identifying short and long-term actions that can help improve Free File for the nation’s taxpayers. The IRS continues to collaborate with the Free File Alliance to identify and further explore ways to better help low- to moderate-income taxpayers. The IRS is also looking at opportunities to improve taxpayer awareness and enhance both the use and satisfaction with the Free File program.

Helpful Links

Prior TaxProf Blog coverage:

https://taxprof.typepad.com/taxprof_blog/2019/10/irs-commissioned-study-defends-benefits-of-free-file-program-in-face-of-criticism.html

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