Expanded IRS free-file system one step closer in Dems’ bill

WASHINGTON — The flagship climate change and health care bill passed by Democrats and soon to be signed by President Joe Biden will bring U.S. taxpayers one step closer to a government-operated electronic free-file tax return system. That 16-year provision within the agreement was formally nixed in 2019, but tax experts and government reports say the program’s existence is largely responsible for the IRS not pursuing its own electronic free file system. Vanessa Williamson, a senior fellow at the Urban-Brookings Tax Policy Center, said “if the IRS moves forward with a free product, it could save lower-income families the money they used to give to H&R Block or TurboTax.” “Tax prep companies are notorious for tricking tax filers into paying for services they should be getting for free,” Williamson said, “so an IRS free file service would be a very welcome step that would save Americans money.” In 2019, ProPublica wrote about Intuit’s TurboTax and H&R Block Inc.'s efforts to mislead taxpayers away from the federally supported free services for which they qualified. In it, The Associated Press reported that an agreement with the Free File Alliance and the IRS prevents the agency from creating its own electronic free-file tax return system. The story was updated on August 15, 2022, to make clear that while the 16-year provision within the agreement was formally nixed in 2019, tax experts and government reports say the Free File Alliance program’s existence is largely responsible for the IRS not pursuing its own electronic free file system.