June 06, 2019

Senator Warren and Representative Sherman Applaud the Exclusion of a Provision Codifying the Failed Free File Program from Tax Legislation in Congress

The lawmakers have introduced standalone legislation to make the tax filing process easier and less expensive for millions of taxpayers

Washington, DC - United States Senator Elizabeth Warren (D-Mass.) and Representative Brad Sherman (D-Calif.) today released statements applauding reports that updates to the Taxpayer First Act will remove a provision codifying the failed Free File program.

"For years, giant tax preparation companies have deliberately rigged the IRS program that is supposed to provide free filing services to low- and moderate- income taxpayers and used it to pad their bottom lines instead," said Senator Warren. "Taxpayers and advocates around the country fought back -- and have won a victory to prevent that broken program from being written into law. Now Congress should take the next step and pass our Tax Filing Simplification Act to make filing taxes easier and cheaper for all Americans."

"I applaud this effort to preserve the flexibility of the IRS to develop its own free online tax filing system. Private tax preparation companies have promised to provide free tax filing software but have misled consumers and steered them towards unnecessary and expensive services," said Rep. Sherman. "I hope that we soon see a free alternative from the IRS as outlined in the Tax Filing Simplification Act. Only the IRS could provide software that is not only free, but comes auto filled with the information from the W-2 and 1099 forms the IRS receives from the taxpayer's employers and banks."

The Free File program was created in 2002 to provide free, online tax filing services to low-income and underserved taxpayers, but the Internal Revenue Service (IRS) delegated the operation of this service to a consortium of private tax preparation companies called the Free File Alliance. Although an estimated 70 percent of taxpayers are eligible for the Free File program, less than two percent of eligible taxpayers use it. Recent ProPublica reporting and further investigation by Senator Warren's staff found that five of the twelve tax preparation companies that participate in the Free File program use a code to hide their Free File products from appearing in online search results and, instead, direct taxpayers to tax filing products that charge them fees and generate profits for the company. Sen. Warren, Rep. Sherman, and other Members of Congress have also asked the IRS and the Federal Trade Commission to investigate tax preparation companies.

An earlier version of the Taxpayer First Act would have codified the current agreement between the Free File Alliance and the IRS, which prevents the IRS from allowing eligible taxpayers to file directly with the federal government, and may have prevented the IRS from ending its agreements with private companies.

In April 2019, Senator Warren and Rep. Sherman led their colleagues in reintroducing bicameral legislation, the Tax Filing Simplification Act, that would ease the tax filing process for millions of American taxpayers and reduce their costs. The legislation would also dramatically simplify the filing process for individuals with simple tax situations; direct the IRS to develop a free, online tax preparation and filing service that does not require the sharing of private information with third parties; and prohibit the IRS from entering into agreements that restrict its ability to provide these services.