The Tax Prep Industry Doesn’t Want You to File Your Taxes for Free



The tax preparation industry claims that current efforts to create a government-run system that would allow eligible Americans to file their taxes for free could be prohibitively expensive. But a new report reveals that the potential cost of such a free-file program could be less than the total tax subsidies scored last year by the biggest player in an industry that reaps billions from people using services that could be free.

In effect, government tax credits are subsidizing Intuit’s fight against a direct-file system that would let Americans avoid paying for the company’s tax filing services. In October, the Internal Revenue Service (IRS) announced it would pilot its free Direct File platform for select taxpayers in thirteen states during the 2024 tax season — potentially delivering a final blow to a twenty-year agreement with the tax preparation industry that prohibited the IRS from effectively becoming a competitor. That’s assuming Congress doesn’t eliminate funding for the free tax filing program as part of its new military aid bill for Israel, as Republicans have proposed.

In return for the IRS not launching its own e-filing product, private tax prep companies like Intuit and H&R Block were required to provide access to free filing services for qualified taxpayers. But only 3 percent of eligible taxpayers utilized these free services, largely due to roadblocks set up by companies that forced people into paying for their products instead. Both companies ended up pulling out of the free IRS program in recent years.

These deceptive strategies and hurdles have proven to be lucrative for the industry. In 2019, at least fourteen million Americans paid for tax prep services that should have been free, according to a Treasury Department audit spurred by a ProPublica investigation. This earned the industry around $1 billion in revenue.


Publication Date: 10 Nov 2023

Publication Site: Jacobin Magazine