Senators ask watchdog to probe IRS Free File program

Sens. Elizabeth Warren, D-Mass., Angus King, I-Maine, and Ron Wyden, D-Ore., want the Government Accountability Office to conduct a review of Free File, the IRS program run in partnership with private tax prep companies to offer most Americans a free way to file their taxes online. 

Created in exchange for the IRS not competing with the tax prep industry in offering its own free, online tax filing service for Americans, the program has long been the main, free tax filing option provided by the government for taxpayers.

For two years, some Americans also had a government option via a program established under the Biden administration, known as Direct File, but the Trump administration canceled that offering last fall and pinned the decision on the cost of the service and low participation rates.

During its existence, tax prep companies had lobbied against Direct File, and many Republicans opposed the program, which provided eligible taxpayers with relatively simple tax situations in 25 states a free way to file online, directly with the IRS. 

Free File — which the IRS is now relying on as the primary free option for Americans to file their taxes online — is provided via eight tax prep companies for most Americans. 

Leading up to Direct File’s creation, both GAO and the Treasury Inspector General for Tax Administration had urged the IRS to offer free, online options beyond Free File, as only a sliver of those eligible for the service actually used it in recent years.

The IRS said that it planned to do a communications campaign for Free File and other free IRS options, including the largely in-person VITA program offered to low-income taxpayers, after it eliminated Direct File.

The trio of senators wants GAO to update its previous report on Free File, in which the watchdog also outlined concerns about heavy-hitters like Intuit and H&R Block departing the program. Those companies had previously served most of the program’s users before their withdrawal. 

Intuit and H&R Block also reached settlements for pushing users toward products they’d have to pay for, even when they could’ve used free options, and for deceptive advertising, respectively.

“The Free File program has a nearly two-decade long record of underperformance,” the lawmakers wrote in their new letter to GAO. “We have serious concerns that Free File cannot efficiently, effectively, and securely serve the taxpayers who are statutorily entitled to free tax filing services.”

The senators want GAO to investigate a host of details, including how the IRS oversees companies participating in Free File, a subject at the center of a 2024 TIGTA report that found the tax agency doesn’t have sufficient oversight over the program partners to make sure that they’re protecting tax data from unauthorized disclosures.

Tim Hugo, executive director of Free File, said in a statement that “the IRS Free File Program, with virtually no promotion by the federal government, has provided more than 3.2 million free federal tax returns to date this past tax-filing season – a more than 5.4 percent increase from the year before.”

Hugo also noted that Free File accounted for 10 times the number of accepted federal returns as Direct File last year. 

The latter program, however, was canceled before it had expanded past 25 participating states. Media reports casting doubt on the future of the program after billionaire Elon Musk, former leader of the Department of Government Efficiency, posted on X that the team powering the program had been “deleted” may have also impacted its use last year.

“Rather than cast inaccurate aspersions on the IRS Free File Program, we would urge policymakers to work with us to promote the a [sic] program that serves million[s] each year, and with effective promotion could serve millions more,” Hugo said.

A GAO spokesperson confirmed that the agency had received the request and was working through its internal process for determining whether or when it conducts work.