Audit Finds TurboTax and Others Charged 14M People $1 Billion for Tax Prep That Should Be Free

An audit by the Treasury Inspector General found that TurboTax maker Intuit, H&R Block, and other tax software companies charged 14 million Americans $1 billion for tax preparation services that should have been free, ProPublica reports.

The audit was launched after ProPublica reported last year that few taxpayers used the Free File program, which is a partnership with the IRS, because of  “the confusing design and complexity of the program and persistently lax oversight by the IRS.”

“The program has been the industry’s tactic to beat back any possibility of the IRS creating its own free tax filing options,” the outlet explained. “It makes free tax prep software available to most Americans, but Intuit and other companies have also found ways to direct people away from Free File and instead to commercial ‘free’ editions, which are not always free.”

Following the report, the IRS reformed the program and banned companies from hiding their free offerings.

Audit rips program:

“The process to participate in the Free File Program is fraught with complexity and confusion. IRS management seems unaware of the complexity and confusion taxpayers face,” the audit said.

The audit found that around 104 million taxpayers were eligible for the free program but only 2.4% used it.

About 67 million did not use any software. Roughly 34.5 million used software and 14 million of those people paid for tax preparation that should have been free.

The report urged that IRS to increase oversight of the companies it partners with and create a complaint system for taxpayers to use.

Intuit claims it’s on board:

A spokesman for Intuit told ProPublica the company “consistently and publicly supported recommendations and efforts to strengthen the [Free File] program as part of our commitment to free tax preparation and our mission to empower individual taxpayers to manage their finances and receive every dollar they earned and deserve… the majority of eligible tax filers using DIY software filed for absolutely free through the Free File Program or using commercial products.”

But Sen. Ron Wyden, the top Democrat on the Senate Finance Committee, said the audit shows the “the Free File program is a mess.”

“Recent IRS reforms to the program do right by taxpayers,” he added, but “the IRS must be vigilant in enforcing these reforms, and Congress must provide the IRS the resources to develop a free public service.”


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