By Kaye A. Thomas
Current as of January 12, 2019
The IRS has announced significant enhancements to the Free File program offered through the IRS website.
The Free File program offered through the IRS website is less than ideal. Leading firms in the tax preparation industry, primarily Intuit (maker of TurboTax) and H&R Block, used their lobbying muscle to get Congress to prevent the IRS from offering a more rational, convenient way to file returns online free of charge. Yet millions of taxpayers have found it useful, and enhancements for the 2019 filing season clamp down on efforts to switch people over to paying customers when they still qualify for Free File. Here are the IRS bullet points on these enhancements:
- Removing the “value-add” button from Free File partner landing pages. Free File members will remove any button or link on their Free File landing pages that would take taxpayers to non-Free File programs. The change is designed to reduce confusion, emphasize and make clear to taxpayers what is included in the Free File program.
- Taxpayers will be automatically returned to the IRS Free File page if they don’t qualify for an offer. To use Free File, taxpayers must use IRS.gov to connect to a company offering Free File. If the taxpayer doesn’t qualify for a free filing option on a particular member site, the new agreement requires the companies to send the taxpayer back directly to IRS.gov to see if they qualify for another Free File offer.
- Returning taxpayers’ first option must be Free File. If a taxpayer returns to a Free File member’s website the following year after using the free program, the first option after logging into their account must be to use the Free File option — before receiving any other offers from the company.
- Follow-up emails to taxpayers who used Free File the previous year will welcome them back to Free File service. This change will strengthen rules for members sending follow up emails to prior year taxpayers / customers, reminding them of the availability of Free File. To help increase program participation, Free File members will email prior year participants about the continuing availability of Free File prior to the start of the filing season. The email cannot contain information about any non-Free File service or product or any marketing or soliciting, except for free or paid state tax preparation offers.
- Emphasis on the in-place review process. Both the IRS and a third party already review each Free File option before filing season to ensure the program standards are being followed by Free File members. The new agreement now reinforces this longstanding requirement, which has always included an unannounced review during filing season.
What we don’t like
Although this program offers a good way to prepare returns free of charge, there are aspects we don’t like.
Artificial constraints. Free File is governed by an agreement specifying that the offering will be available only to taxpayers with income below a specified level that includes 70% of taxpayers. People with income above that level can’t use the service, even if their tax returns are simple.
Age discrimination and other nonsense. But that’s not all. Each member firm offering services through Free File is allowed to make this offering available to no more than half of this 70% group. They’re required to impose additional artificial constraints, such as an income level or the state where you reside. Particularly galling are the companies that have imposed age limits. These companies have agreed to make their services available “on a non-discriminatory basis,” but apparently age discrimination doesn’t count.
Magic door. Even if you meet the Free File criteria, companies are permitted to charge for exactly the same service if you sign up directly on their website, and some of them do this. You could pay over $70 for a federal and state return at the website for one of these companies when the same federal and state return would be free if you went through the magic door provided by the IRS Free File portal.
Scrambled info. Then there’s the scrambled information you get when you enter that magic door. The Free File page lists many different providers, each with different eligibility requirements. They aren’t listed alphabetically or in any other logical order. In fact, they’re randomly reordered each time you access the page.
Not the only way to file free
If you can’t find a good fit through Free File, you still may be able to prepare and file your return free of charge through an offer that’s available directly from the software provider. For a pragmatic guide to what’s available and how to choose the best solution, visit Free Filing from Tax Software Providers.