Free File Alliance

In a typical year, about 70% of filers (roughly 100 million people) are eligible to use Free File,[9] but only about three million do, according to Tim Hugo, the FFA's executive director.[10] In 2019, for example, only 2.7% of the 104 million taxpayers eligible for Free File used it, while 34.5 million taxpayers eligible for Free File actually paid for tax software offered by companies in the Free File Alliance.[11]

A 2019 audit of the Free File system by the Treasury Inspector General for Tax Administration found that "the process taxpayers must follow to participate in the Free File Program is obscure and complex, and there is a lack of adequate advertising and oversight of the Program by the IRS".[11]

The Free File Alliance has taken deliberate steps to hide its free services so that most filers continue to use paid tax preparation services.[12] Methods used by the FFA to hide its free services and steer filers towards paid services include deliberately hiding free services from Google search results,[13][14] deceptively marketing commercial tax preparation services as free and then upselling users paid services even when they are eligible for Free File,[15] not including links to Free File services on their websites (TurboTax's Free File service, for instance, was not available on TurboTax.com),[15][16] using dark patterns to push users towards paid services,[15] and using confusing naming practices (for example, TurboTax called its Free File service the "Freedom Edition").[15]

The Free File Alliance (FFA) was largely organized by Intuit, and guided by a former lobbyist for the company. In 2019, ProPublica reported that tax preparation agencies used the Free File Alliance to head off the potential "encroachment" by the IRS, which could offer its own tax preparation service or introduce return-free filing. In exchange for Intuit, H&R Block, and other members providing Free File options, the IRS was restricted from providing its own free filing tool.

In 2020, the rule barring the IRS from designing its own filing service was lifted and providers were prohibited from hiding Free File options from search results.[16][17] Despite publicly announcing their support for the changes,[18] Intuit (the maker of TurboTax), as well as H&R Block, announced that they would be leaving the Free File Alliance.[19]

In 2007, Alliance members agreed to remove controversial ancillary offerings such as refund anticipation loans from the program, after half of Free File users making ancillary purchases stated their purchases were not intended.[20][21]