Report: Private tax prep services deliberately hid free filing options

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Taxes and money. (Karolina Grabowska / Pexels)

ALBANY, N.Y. (NEWS10) — Tax preparers misled million of consumers by hiding free filing options in 2019, according to a report released Wednesday by New York’s Department of Financial Services.

“This is yet another blow to the public trust.”

Linda Lacewell
Superintendent of Financial Services

The report covers the investigation by DFS into why only 2.5 million used the IRS’s Free File Program in 2019, when 100 million were eligible. The program was designed to help low-income and otherwise disadvantaged taxpayers by letting them submit simple tax returns for free. The report ultimately concluded that:

  • Intuit (owner of TurboTax), H&R Block, TaxSlayer, TaxHawk, and Drake Enterprises deliberately edited website code to hide the free option
  • Deindexing deprived consumers of a simple method of accessing the program
  • The private companies created and marketed their own products as “free” before upselling costlier products
  • Taxpayers experienced confusion when trying to navigate commercial tax preparers’ websites while looking to Free File
  • The IRS provided insufficient oversight, funding, and marketing of the program

Taxes are due July 15, and if you haven’t filed yet, use the IRS’s lookup tool to confirm whether you’re eligible, and to choose the best option for your situation. Check New York’s information about free filing for state taxes. New York tax department representatives will be available until 7 p.m. on Tax day for last-minute questions at (518) 457-5181.

The report shows that private, commercial tax preparers that charge flat fees to file returns deliberately hid the free option from their clients. They suppressed information about the program by “deindexing” website landing pages, which preventing taxpayers from even finding the program, let alone using it.

“The Free File Program is broken and was exploited by commercial tax preparer companies to drive their own profits at the expense of low-income taxpayers.” said Lacewell. “Consumers who most needed a no-cost simple means to file their taxes were left in the cold.”

The report also found that the IRS undermined its own program through lack of support, oversight, and outreach efforts.

“The efforts to suppress Free File participation are deeply troubling, and follow years of IRS underinvestment in promotion of the Free File Program,” said Michael Schmidt, Commissioner of the State Department of Taxation and Finance, in response to the report. “I urge the IRS to aggressively market and educate the public on the Free File Program, which would keep hard-earned dollars in the pocketbooks of working families. In New York, we’ve shown that this is possible, increasing participation by 40% in just the last year and saving New Yorkers an estimated $45 million.”

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