- At least 14 million Americans paid for tax prep services in 2019 they could have received at no cost, a government audit found.
- That led to an additional $1 billion in revenue for tax software companies like H&R Block and TurboTax maker Intuit, ProPublica reported.
- The audit suggested juicing Free File's advertising funding, but that's unlikely to occur soon given years of deep budget cuts in the IRS.
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Over 14 million Americans paid for tax preparation services in 2019 that they could have received free, a fiery audit released Wednesday from the Treasury Inspector General for Tax Administration found.
As a result, tax prep companies like Intuit — the maker of TurboTax — and H&R Block generated a whopping $1 billion in additional revenue, according to an analysis from ProPublica.
The audit was designed to find out why few taxpayers use the Free File program, the product of a partnership between the IRS and private tax-prep companies.
It said the Free File Program the IRS invites taxpayers to use is "obscure and complex," and it faulted the agency for "a lack of adequate advertising and oversight."
"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.
Around 104 million Americans were eligible for Free File last year, the audit reported, but only 2.4% ended up using the federal program.
Of the 34.5 million people who used software to prepare their taxes, 14 million who were eligible for free services paid when they didn't need to.
The audit suggested juicing Free File's advertising funding, but that remains unlikely anytime soon given the years of deep budget cuts the IRS has dealt with.
Tax software companies like Intuit have spearheaded a decades-long effort to prevent the federal government from creating a digital tax-filing alternative, spending millions in lobbying dollars.
Last year, Congress passed a bill barring the IRS from developing its own online tax filing system. The law included a provision codifying the Free File program, allowing Americans to file taxes at no cost but through private companies instead.
The IRS announced in December it would no longer abide by the agreement not to compete with TurboTax, though it still hasn't created an online filing system for this year's tax season.
Companies like Intuit and H&R Block allow most Americans to file for free as long as they earned below the 70th percentile of income distribution. But most eligible Americans don't take advantage of that and only 3% file at no charge.
For 2019 taxes, workers with incomes of $69,000 or less will be eligible to use free tax-filing software.
There is a piece of congressional legislation that would direct the IRS to create the system, and it's been sponsored by several Democratic presidential candidates, including Sens. Elizabeth Warren and Bernie Sanders.
Bob Bryan contributed to this report.