Democrats accuse big tax prep firms of sabotaging government electronic free file system

Congressional Democrats are accusing big tax preparation firms, including Intuit and H&R Block, of undermining the federal government’s upcoming electronic free file tax return system, according to the Associated Press. They are demanding lobbying, hiring, and revenue data to evaluate the situation.

The lawmakers accuse the companies of lobbying against the new program, hiring former government workers to sway public interest against free file for all, and deliberately sabotaging a government program that offered free tax prep services.

On Thursday, Sen. Elizabeth Warren and Rep. Katie Porter sent letters to the executives of Intuit, H&R Block, the American Coalition for Taxpayer Rights, and the Free File Alliance, a group of tax preparation companies that provide free online services through the IRS website.

Warren and Porter are seeking specifics on the amount of money firms have made since becoming members of the Free File Alliance and information on the number of former government workers who have joined their firms in the past two years.

The Free File Alliance agreement prevented the IRS from creating its own free tax return filing system in exchange for the companies providing free services to taxpayers making $73,000 or less annually. A 16-year provision within the agreement ended in 2019. Tax experts and government reports say the program’s existence impeded the IRS from pursuing its own electronic free file system, and the program largely failed to reach its intended audience, with only 3% of eligible taxpayers using it.

The IRS in May announced that it would launch a pilot program for the 2024 filing season to allow taxpayers to file directly to the agency for free. If the effort is successful it could be implemented nationwide in the future, potentially saving taxpayers the added cost of going through a tax prep company.

As it moves forward under the helm of new IRS Commissioner Daniel Werfel, groups on both sides of the issue have mobilized to sway the public and Congress over the usefulness of the program.