IRS Revamps Free File Program, Nixes Noncompete Agreement with TurboTax

The Internal Revenue Service (IRS) this week announced an agreement with Free File, Inc. (FFI) designed to bring more clarity for taxpayers choosing to use free online software during the 2020 filing season. According to the IRS, the new agreement will help make the Free File program more taxpayer-friendly while strengthening consumer protections in several key areas.

The Free File program is a partnership between the IRS and tax-preparation companies to provide free tax-filing software to low- and middle-income taxpayers. Taxpayers earning less than $69,000 a year are eligible to file their federal taxes at no cost, but many tax preparation companies were found to have purposefully steered customers to their paid products even when free options were available.

The addendum forbids TurboTax maker Intuit and the other nine companies that make up the Free File Alliance from excluding their Free File landing page from an organic internet search. As part of the agreement, the IRS will begin offering its own Free File alternatives, something it was previously prohibited from doing.

According to the IRS:

“This updated agreement is part of a larger effort by the IRS to help taxpayers meet their tax obligations,” said IRS Commissioner Chuck Rettig. “It continues to show the partnership we enjoy with the Free File partners and the commitment we both share in helping taxpayers since the program’s creation 18 years ago. The improved process will make Free File stronger and give taxpayers another reason to consider this valuable software option.”

“The IRS and FFI will also continue to work together to identify and explore ways to better help low- to moderate-income taxpayers and to pursue meaningful opportunities to enhance taxpayer awareness and use of the Free File Program beyond the 2020 filing season,” Rettig added.

Highlights of the new agreement reached on the Free File program include several features designed to make the program more taxpayer friendly. Among the features in the new agreement, FFI members:

  • Will not exclude their Free File Landing page from an organic internet search.
  • Will ensure a link on their sites is available to return taxpayers to the IRS Free File website at the earliest feasible point in the preparation process if they do not qualify for the Member’s Free File offer, and
  • Will regularly survey taxpayers who successfully e-filed a tax return through the Free File program, reporting their results quarterly to the IRS.

“These steps will help further protect taxpayers and make important improvements to the program,” Rettig said. “The IRS is committed to improving the Free File program and providing a great option for taxpayers to consider when preparing their taxes.”

Useful Links

IRS: New Free File Agreement Signed to Strengthen Program, Help Taxpayers

IRS: Addendum to the Eighth Memorandum of Understanding of Service Standards and Disputes Between the IRS and Free File, Inc.

Pro Publica: The Turbo Tax Trap, How the Tax Prep Industry Makes You Pay

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