More people can file taxes for FREE this year!

It’s been way too long a fight, with powerful lobbyists who were backed for years by Congressional patrons, but the end of the corporate tax prep monopoly is near. (Technically, it’s an “oligopoly” since several companies are involved)!

This tax season, almost any taxpayer in some dozen states can choose the government itself to help with their personal taxes! Who is providing this competition?  It’s the IRS! It has a new government competitor to the tax prep program provided by tax prep companies called “Free File;” the new, actually “FREE,” IRS program is called called  “Direct File”

As the Washington Post notes, the IRS is taking baby steps as it rolls out the new program:

“Direct File can handle only certain tax situations. If you have self-employment income, or if you want to claim a tax credit for child-care expenses, for instance, you can’t use the new program.”

For many years, the tax prep industry locked in its monopoly — for years the companies even got free space on the IRS website — by providing a so-called “Free File” program ONLY to lower income Americans– but there was a catch. The firms charge fees for add-on services. Many are used by low-income consumers who qualify for the refundable tax credit known as the Earned Income Tax Credit (EITC) as well as by more affluent consumers.

Don’t expect the private companies to go down without a fight. The New York Times included this barb in its story on the roll-out:

“A spokeswoman for Intuit, Tania Mercado, criticized the direct file project as a “half-baked solution” and a waste of taxpayer money. “The direct file scheme is a solution in search of a problem,” she said. Intuit makes the TurboTax tax preparation software.”

The non-profit investigative journalists at the ProPublica newsroom have investigated tax prep companies, including Intuit Turbotax and H&R Block, the IRS Free File program and related tax matters for many years. Learn more at its website: The TurboTax Trap: How the Tax Prep Industry Makes You Pay.

You may have seen TurboTax ads during the football playoff games this weekend. There’s money to be made  “helping” you pay your taxes!

So far, they haven’t figured out how to charge for the only other thing in life that’s said to be guaranteed, not death, just taxes. Until then, they’ll probably oppose IRS Direct File!  It’s FREE!

Topics
Authors

Ed Mierzwinski

Senior Director, Federal Consumer Program, PIRG

Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.