TurboTax drops IRS Free File program after 2 a long time. What meaning for you

Angela Lang/CNET

Intuit, the company behind the tax filing software TurboTax, announced in a July 15 blog post that it would no longer participate in the IRS Free File Alliance, a partnership between the IRS and the tax filing software industry that offers free tax software to Americans earning $72,000 or less. 

Intuit cited “limitations of the Free File program” and a desire to focus on “further innovating in ways not allowable under the current Free File guidelines” within the no-cost program as the catalyst for its exit. Under the agreement governing the program, participating companies are restricted from marketing paid products to those using Free File services.

In addition to tax services, the company says it’s focused on piloting programs to help customers save money, pay off debt and increase their incomes. An Intuit spokesperson told CNET that the company is “committed to continuing to offer free tax preparation while accelerating innovation to address all of consumers’ financial problems. Intuit’s TurboTax Free Edition is the industry’s most used free tax preparation offer and will continue to be available to more than 50 million people who file simple tax returns.”

Though we don’t know all of the ways that Intuit’s exit from the Free File Alliance will affect existing Free File customers, the IRS program or the 2021 tax season (coming in 2022), we have received some details from the company. Read on for the backstory of the Free File Alliance, what’s changing for Intuit’s Free File users and the remaining options in the IRS Free File program. 

What’s the Free Filing Alliance?

Before its exit, Intuit was a member of the Free File Alliance for nearly two decades. During this time, the company, along with H&R Block and other Alliance members, aggressively lobbied Congress to prevent the IRS from creating its own free tax filing system. Free File Alliance members argued that competing with the IRS would constitute “a continued competitive threat to our business” that “could potentially have material and adverse revenue implications.”

Their efforts paid off in April 2019 when the US House Ways and Means Committee passed the Taxpayer First Act, in which the IRS agreed not to create its own system — as long as the group of tax filing companies provided free services to qualifying taxpayers.

The bill passed following the publication of an April 2019 ProPublica article, which reported that Intuit had intentionally used misleading marketing and website design known as “dark pattern” Internet tactics to steer taxpayers away from the Free File program and toward paid products. That December, the IRS presented a new tax filing agreement that prevented companies from obscuring free products in Internet searches. It also lifted the ban on allowing the IRS to create its own tax filing system. “This updated agreement is part of a larger effort by the IRS to help taxpayers meet their tax obligations,” IRS Commissioner Chuck Rettig said in a press release. Intuit publicly supported the changes. 

Still, only a fraction of eligible taxpayers use free services. According to a federal review, less than 3 million people used the Free File program in 2019, though more than 100 million taxpayers were eligible.

If TurboTax’s Free Edition is still available, what exactly has changed?

In an email, an Intuit spokesperson told CNET that the company plans to expand the benefits of using its TurboTax Free Edition to “complete financial health in tax and beyond.” Such an extension of services was not possible under IRS Free File rules, according to Intuit. 

“TurboTax Free Edition is a different product than what TurboTax donates for free tax preparation through the Free File program,” the spokesperson said. “The Free File program offer from Intuit is called IRS Free File delivered by TurboTax. They are fairly similar, but the Free File program guidelines do not allow us to do things like provide our filers with a completely free of charge advance on their refund if they need money faster in order to pay bills.”

I’ve filed taxes using IRS Free File delivered by TurboTax. What happens to my data now?

Intuit didn’t immediately respond to CNET’s questions regarding user data for 2020 returns filed via the Free File program. The company’s website outlines how to request copies of personal data, change your marketing preferences and delete your data from its servers. 

What are my free tax software options now?

A number of leading tax software providers offer no-cost tax filing services if your income level is under a certain threshold and your return is simple. Credit Karma Tax provides free state and federal filing for 2021, and H&R Block offers a free option for W-2 tax filers and those who have collected unemployment during the past year.

Despite Intuit’s exit from the program, there remain a number of Free File options available to taxpayers with an annual gross adjusted income of $72,000 or less. The IRS program now includes eight participants:

And if you earn more than $72,000 per year, you are eligible to use the program’s Free File Fillable Forms — electronic versions of IRS paper forms — though they include no preparation assistance.

What other free tax prep resources are available?

Depending on your income, age and other factors, you may qualify for free tax preparation and filing from one of these federal programs:

  • Volunteer Income Tax Assistance. VITA is a federal grant program that provides free tax prep services to low and moderate-income filers who earn $57,000 or less per year, people with disabilities and limited English speakers. 
  • Tax Counseling for the Elderly. The TCE program offers free return filing and tax help for seniors over 60 regarding pensions and retirement tax issues. 
  • The Department of Defense provides service members and their families with free tax resources, including software from H&R Block, as well as financial and legal counseling. MilTax participates in the VITA program, and consultants are available by phone, live chat or in person at the nearest military base. 

The IRS oversees the VITA and TCE programs, which are staffed by IRS partners and certified volunteers who must pass tax law training that meets or exceeds IRS standards. Tax returns receive an IRS quality review before filing. 

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