Fact Checked

Millions paid for tax prep when they qualified for Free File Program, audit shows

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A new government audit shows that millions of Americans paid tax software companies to do their taxes when they could have used the IRS-sponsored Free File Program at no cost.

The Treasury Inspector General for Tax Administration, or TIGTA, initiated the audit in response to concerns raised by Congress and other stakeholders about the effectiveness of the program.

Findings for the 2019 tax season showed that while 104 million Americans qualified for the program, only 2.5 million actually took advantage of it.

And of the 101.5 million who qualified for the program but didn’t use it, more than 34.5 million used commercial software to file their tax returns instead.

Read on for more details of the Free File audit and what changes might result.

Want to know more?

What are the details?

Since 2003, the IRS has partnered with Free File Inc. to provide free tax preparation services to eligible taxpayers, which includes those who are economically disadvantaged or underserved. But following reporting on the tax prep industry by ProPublica last year, Congress raised questions about how effective the Free File Program was for taxpayers.

TIGTA, which regulates the IRS, released audit findings into the Free File Program this week. The audit found that many taxpayers were either unaware of, or confused by, the program, which led to a lack of participation.

TIGTA also criticized the IRS for failing to provide enough oversight of the program so that tax software companies involved were not overcharging taxpayers.

As a result of the findings, TIGTA made nine recommendations to the IRS to overhaul the Free File Program. These included better outreach and advertising so that eligible taxpayers are aware of the program and giving taxpayers a way to provide feedback on their experiences.

Why does this matter?

The latest Free File Program audit is important to the average taxpayer because it shows that taxpayers were paying Free File providers when they could have filed for free.

How much money? It depends. Take Free File–participant TurboTax. Outside of Free File, if you need to itemize deductions, you’ll pay up to $60 to do your Federal taxes only. But if you’re eligible for the Free File Program, you should be able to file with TurboTax at no cost — even with itemized deductions.

What can you do?

Filing taxes is stressful enough without having to worry about overpaying. As you prepare and file taxes this year, remember that you have options.

About the author: Paris Ward is a content strategist at Credit Karma, providing readers with the latest news that will aid their financial progress. She has more than a decade of experience as a writer an… Read more.