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Free File tax program goes unused by millions of Americans: Here's how to know if you qualify

·3 min read

Did you just hand over anywhere from $50 to $300 to prepare your taxes when you could have gone online and done so yourself for free?

A newly released audit by the Treasury Inspector General for Tax Administration blamed "complexity, confusion and lack of taxpayer awareness" for the miserable participation rates associated with the Free File program found at www.irs.gov.

About 70% of tax filers can use an online system found at www.irs.gov to get free tax software from a variety of brand name firms. They just don't know it or get tricked into doing something else.

Free File is open to taxpayers who have income of $69,000 or less.

Some troubling statistics from that audit:

  • The oversight agency estimated that more than 14 million taxpayers ended up paying a fee to prepare and e-file their federal income tax return in the 2019 filing season, even though they qualified for free services.

  • The agency estimates that more than 9 million taxpayers who met the free requirements but paid a fee were unaware of Free File or how to access it.

  • Only 2.5 million – or 2.4% of the 104 million eligible taxpayers – obtained a free return filing through the Free File program during the 2019 filing season.

  • About 35 million taxpayers – who could get tax preparation software for free because they met the Free File criteria – used commercial software offered by the same firms that participate in Free File to file their tax return.

  • About 67 million taxpayers who would be eligible for Free File went some other route.

The 2020 tax season kicks off Jan. 27 when the IRS will first begin processing e-filed tax returns. But tax scams are already up and running.
The 2020 tax season kicks off Jan. 27 when the IRS will first begin processing e-filed tax returns. But tax scams are already up and running.

The Internal Revenue Service has agreed to take steps to improve communication and oversight of the Free File program in the future. In December, the IRS announced an agreement with Free File participants to make the program more taxpayer-friendly in 2020.

The Treasury Inspector General for Tax Administration warned that taxpayers often don't realize that they must go to the Free File web page at www.irs.gov as a starting point for Free File.

If you start out typing words like "free tax filing" into a search engine, you're bound to see other offerings that may involve free services but not the Free File program.

"Once on the members' commercial websites, the taxpayers are not guaranteed a free return filing," the report stated.

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The audit was initiated in May 2019 after members of Congress raised concerns. ProPublica published a series of critical articles, including a report in late April indicating that TurboTax – a participant in Free File – had deliberately hidden its Free File page from search engines, such as Google. (Intuit has changed the code on its Free File page so that the free version of TurboTax is no longer hidden from Google and other search engines.)

Free File first became available in 2003 to help eligible taxpayers find reliable tax software for free.

For tax filers, Free File remains an option this tax season. But the best bet is to access Free File through www.irs.gov. Click on the "Do Your Taxes For Free" button at the top left corner.

The Free File program remains a solid option, something that could save hundreds of dollars in tax prep services for many young workers, seniors and those on limited budgets.

The free site at IRS.gov also includes Free Fillable Forms that are available to all, even those above the $69,000 threshold for Free File. That service only provides basic math help and you must know how to do your taxes yourself.

Contact Susan Tompor: 313-222-8876 or stompor@freepress.com. Follow her on Twitter @tompor. Read more on business and sign up for our business newsletter.

This article originally appeared on Detroit Free Press: Taxes 2020: Free File tax program goes unused by millions who qualify