November 15, 2019

Senators Warren and Brown Raise Alarm about IRS's Ongoing Failure to Fix the Free File Program

Lawmakers call on IRS to provide its own free tax-filing site after reports show the agency refuses to police for-profit tax preparation companies cheating low- and moderate-income families; Senator Warren has introduced the Tax Filing Simplification Act, which would require the IRS to provide its own free tax-filing software, and take other steps to make tax filing easier

Text of the Letter (PDF)

Washington, DC - United States Senators Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio), a member of the Senate Finance Committee, sent a follow-up letter to Internal Revenue Service (IRS) Commissioner Charles P. Rettig after new reports revealed that for-profit tax preparation companies in the Free File Alliance (FFA) continue to use tricks and traps to charge low- and moderate-income families fees to file their taxes, and that the IRS refuses to address the glaring failures that allow tax preparation companies to prioritize their profits over their commitment to providing a free filing option for low-income taxpayers.

"The IRS's continued refusal to police the bad faith efforts by participants in the Free File program to scam customers, which have now cumulatively cost millions of taxpayers millions of dollars, demonstrates that the only way for the agency to fulfill its commitment to free tax filing services for low- and moderate-income filers is to provide that service directly," the senators wrote.

FFA is a consortium of private tax preparation companies -- including Intuit, which owns the tax preparation software TurboTax -- that have an agreement with the IRS to provide free tax preparation services to taxpayers who qualify in exchange for the IRS not developing its own tax preparation software. However, according to reporting from ProPublica, Intuit has used design tricks known as "dark patterns" to push customers eligible for Free File into paying more to file their taxes by "tap(ping) into Americans' fear, uncertainty and doubt about the tax filing process." Another ProPublica report revealed that in the fall of 2018 -- just days before the IRS Advisory Council was set to publish a "blistering" report concluding that "deficient oversight and performance standards for the Free File program put vulnerable taxpayers at risk" -- IRS officials secretly, after privately negotiating with FFA companies, extended the Free File program for a full year, with no public negotiations or discussions.

"These new allegations are the latest manifestation of Intuit's twenty year-long battle to prevent the IRS from providing services directly to taxpayers for free," the senators wrote. "As a result of these efforts, and aggressive lobbying, the IRS has given Intuit and the other FFA participants unprecedented control over the operation of the Free File program."

In response to Senator Warren's previous inquiries, Commissioner Rettig said that the IRS would hire an outside contractor "to provide a thorough, independent review" of the IRS Free File program. That review, produced by MITRE Corporation and released last month, did not address the failures of the Free File program or IRS's failure to hold companies accountable.

"Inexplicably, this supposedly objective investigation frames these serious problems disingenuously and in an overtly industry-friendly way, handing the IRS a guidebook for how to excuse and ignore the program's most egregious failures," wrote the lawmakers. "Despite Free File's serious and well-documented failures, the report makes the extraordinary suggestion that Free File has been a success."

Senators Warren and Brown requested responses from the IRS no later than November 27, 2019 about how the agency plans to fix the Free File program to address egregious abuses by FFA member companies, and additional information about the integrity of the evaluation the IRS commissioned to evaluate the program.

Senator Warren has long fought on behalf of taxpayers to make it easier and cheaper to file their taxes:

  • She introduced the Tax Filing Simplification Act, which would require the IRS to provide its own free tax filing software, and take other steps to make tax filing easier and cheaper. Representative Brad Sherman (D-Calif.) introduced the House companion.
  • She released Tax Maze, an investigative report that details how the tax preparation industry blocks government from making Tax Day easier, and calling on the IRS to improve the tax refund process in response to Government Accountability Office findings that show low-income and some taxpayers of color are more likely to use expensive tax-time financial products in order to access their refund more quickly to meet immediate financial needs.
  • She asked Intuit's CEO to respond to reports that Intuit is deceiving American taxpayers about their tax filing options by deliberately directing them to costly profit-generating products, rather than to the free tax-filing option the company has agreed to provide eligible taxpayers.
  • She led letters to the IRS and the Federal Trade Commission calling for investigations into Free File members' deceptive practices and calling for the IRS to force the private tax preparation companies to refund consumers who were eligible for Free File but were steered into paid products.
  • She urged the IRS to select consumer advocates and individuals representing the needs of low-income, elderly, disabled, and non-English-speaking taxpayers to serve on its Electronic Tax Administration Advisory Committee. 
  • She introduced the Refund Equality Act to ensure that legally-married same-sex couples -- who until the U.S. Supreme Court's 2013 U.S. v. Windsor decision were barred from filing federal taxes jointly -- are permitted to file amended tax returns back to the date of their marriage. Congresswoman Judy Chu (D-Calif.) introduced the companion legislation.