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MSP #4: Free File

The IRS’s Free File Offerings Are Underutilized, and the IRS Has Failed to Set Standards for Improvement.

TAS Recommendations and IRS Responses

1
1.

TAS RECOMMENDATION #4-1

Develop actionable goals for the Free File program, including targeted-use percentages, prior to entering into a new agreement with Free File, Inc.

IRS RESPONSE TO RECOMMENDATION: The existing agreement between IRS and Free File, Inc. (FFI) expires on October 31, 2021. We agree to study the issue to identify new actionable goals for the program that will inform the IRS’s formal negotiation position with FFI in reaching a new agreement.

Note – this is the same recommendation as 2019 Recommendation 5-5. IRS Response to 2019 5-5: The IRS established new goals for the Free File program that were shared with FFI Leadership in July 2020. They did not have any issues with the new goals. At that time, we indicated we will also discuss the new goals at the MOU negotiations prior to the expiration of the current MOU in October 2022. The IRS is also developing  a structured approach for creating program metrics to evaluate the FF Program. We will determine if targeted-use percentages are appropriate measures for this program.

CORRECTIVE ACTION: The IRS established new goals for the Free File program that were shared with FFI Leadership in July 2020. They did not have any issues with the new goals. At that time, we indicated we will also discuss the new goals at the MOU negotiations prior to the expiration of the current MOU in October 2022. The IRS is also developing a structured approach for creating program metrics to evaluate the FF Program. We will determine if targeted-use percentages are appropriate measures for this program.

TAS RESPONSE: The National Taxpayer Advocate appreciates that the IRS will study the issue to identify new actionable goals for the program. The National Taxpayer Advocate looks forward to the results of the study and the opportunity to review the recommended actionable goals. The National Taxpayer Advocate continues to recommend including targeted-use percentages as one of those actionable goals.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 11/30/2022

2
2.

TAS RECOMMENDATION #4-2

Work with TAS to create measures evaluating taxpayer satisfaction with the Free File program and test each return preparation software’s ability to complete various forms, schedules, and deductions.

IRS RESPONSE TO RECOMMENDATION: The IRS will work with FFI and TAS to better understand the taxpayer experience between the IRS and member websites and find a means to measure and track customer satisfaction within the limited IRS budget.

While the IRS and FFI currently require a minimum listing of core Forms 1040 and schedules, most participating companies go beyond this requirement and offer nearly all available Forms 1040 and schedules. Participating companies guarantee the calculations performed by the federal Free File offering. This guarantee gives taxpayers confidence that the software they select will accurately prepare their return even in complex tax situations, with recourse by taxpayers to the company if there are  issues.

CORRECTIVE ACTION: The IRS will work with FFI and TAS to better understand the taxpayer experience between the IRS and member websites and find a means to measure and track customer satisfaction within the limited IRS budget.

TAS RESPONSE: The National Taxpayer Advocate appreciates that the IRS will work with TAS to better understand the taxpayer perspective and find ways to measure and track customer satisfaction. The National Taxpayer Advocate also appreciates that the IRS is working with a limited budget, which is why she recommends that the IRS discontinue the Free File program if it is unable to adequately administer and oversee the program.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

3
3.

TAS RECOMMENDATION #4-3

Provide Free File Fillable Forms and Software options for English as a Second Language taxpayers.

IRS RESPONSE TO RECOMMENDATION: The IRS plans to evaluate opportunities for expanding Free File software services to taxpayers for whom English is considered a second language. The IRS plans to collaborate with FFI to encourage members to offer additional Spanish services. We will include the issue in negotiations with FFI prior to the existing agreement’s expiration on October 31, 2021.

CORRECTIVE ACTION: The IRS plans to evaluate opportunities for expanding Free File software services to taxpayers for whom English is considered a second language. The IRS plans to collaborate with FFI to encourage members to offer additional Spanish services.  We will include the issue in negotiations with FFI prior to the existing agreement’s expiration on October 31, 2021.

Update: Currently, two traditional Free File providers offer Spanish products and use of these products by taxpayers is very low. We will include this recommendation for consideration by IRS leadership to determine if it will become part of the IRS negotiating position of the MOU with Free File Inc. The existing MOU expiration has been extended to October 31, 2023.

TAS RESPONSE: The National Taxpayer Advocate appreciates that the IRS will evaluate ways to expand Free File software and Free Fillable Forms for English as a second language taxpayers. TAS has translated the Form 1040 into Spanish and can provide assistance to the IRS to translate Free Fillable Forms and better serve Spanish and other English as a second language taxpayers.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 10/13/2023

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4.

TAS RECOMMENDATION #4-4

Prepare an advertising and outreach plan to make taxpayers, particularly in underserved communities, aware of the services available through the Free File program.

IRS RESPONSE TO RECOMMENDATION: ​Due to its current budget, the IRS does not have marketing funds to pursue an advertising campaign to increase Free File program awareness. The IRS does issue annual traditional and social media promotions that include key messages about Free File on IRS.gov and in the Form 1040 instructions. The IRS welcomes feedback from the NTA about strategies for expanding  Free File awareness among taxpayers in underserved communities, given our existing resource constraints.

Update: We agree with this recommendation and will develop a comprehensive communication plan that will identify additional outreach venues. The IRS will continue to promote Free File as a free online option for taxpayers, and it will remain a key component of filing season messaging.

Final Update: The W&I Communications and Liaison office developed a comprehensive communications plan leading up to and into the 2020 filing season. That plan is attached (2020 Free File Launch Communication Plan). Further, a sampling of the social media efforts and take-up by other outlets is also attached (Free File Campaign 2020 TOPE). Please note the last item in the Communication Plan for an April 10 news release announcing new web page and “simplified” product for filing for EIP.

CORRECTIVE ACTION: Due to its current budget, the IRS does not have marketing funds to pursue an advertising campaign to increase Free File program awareness. The IRS does issue annual traditional and social media promotions that include key messages about Free File on IRS.gov and in the Form 1040 instructions. The IRS welcomes feedback from the NTA about strategies for expanding  Free File awareness among taxpayers in underserved communities, given our existing resource constraints.

TAS RESPONSE: The National Taxpayer Advocate appreciates that the IRS faces budget constraints. The National Taxpayer advocate also appreciates that the IRS has implemented some measures that may have increased participation for the 2019 filing season (e.g., sending emails to taxpayers who used Free File last year welcoming them back to the Free File service). In her 2018 annual report, the National Taxpayer Advocate mentioned that the IRS does little to no advertising of Free Fillable forms. She also pointed out that, while making taxpayers aware of the Free File program is useful, the IRS must help taxpayers understand the value of Free File to encourage more taxpayers  to use it. Despite its limited budget, the IRS can take some steps to improve its advertising and explanation of the program on its website (for example, by more prominently positioning information and links about the Free File Program on its website). However, given that many people, especially those in underserved and low income communities, may not have adequate access to the internet, it is also important to conduct outreach and advertising to these communities, and an increased budget may be necessary to make noticeable improvements.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

5
5.

TAS RECOMMENDATION #4-5

Allow Free File members to provide services to all taxpayers as a part of its next operating agreement instead of capping the percentage of eligible taxpayers each software provider can cover.

IRS RESPONSE TO RECOMMENDATION: We appreciate the NTA’s perspective that the program is helpful enough that the NTA would like to see it expanded to all taxpayers. The 50 percent limitation in place at the company level included in the agreement provides a very important means to allow small and medium companies to compete with the largest companies.  However, we will explore the feasibility of adjusting the current participation percentages.

CORRECTIVE ACTION: We appreciate the NTA’s perspective that the program is helpful enough that the NTA would like to see it expanded to all taxpayers.  The 50 percent limitation in place at the company level included in the agreement provides a very important means to allow small and medium companies to compete with the largest companies.  However, we will explore the feasibility of adjusting the current participation percentages.

Update: The 50 percent limitation in the MOU agreement provides a very important means to allow small and medium Free File members to compete with larger companies. However, we will explore with IRS leadership the feasibility of adjusting the current participation percentages. The existing MOU expiration has been extended to October 31, 2023. Next Update 12/31/2023

TAS RESPONSE: The National Taxpayer Advocate appreciates that the IRS seeks to provide opportunities for small and medium companies to join Free File and compete with the largest companies. However, the concern is misplaced. When the Free File program was first launched, there was no cap on the percentage of taxpayers a software provider could cover. One of the participants that produced a lesser-known product decided to offer its product to all taxpayers. The larger software companies quickly followed suit out of concern they might lose market share if taxpayers could prepare their returns for free with a different vendor.  These companies were also concerned that taxpayers  would stop paying for their products if 100 percent of taxpayers could use their software for free through Free File. When the first extension of the Free File agreement was negotiated, it was the providers of the best-known software products that pushed hard to impose an upper limit on the percentage of returns a software provider could cover. For this reason, the National Taxpayer Advocate does not believe an upper limit would aid small and medium-sized software  companies.

In addition, use of Free File software was at its greatest when software providers could offer unrestricted services to taxpayers. Despite the fact that e-filing has exponentially increased, more taxpayers used Free File software before this restriction was implemented (more than five million in tax year (TY) 2004, compared with about 2.5 million in fiscal year (FY) 2018), and more providers participated in the program (20 in the program’s early years compared with 12 currently). Regardless of the intent, this limitation has failed to achieve its goal, and the National Taxpayer Advocate continues to recommend that it be eliminated.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 12/31/2023

6
6.

TAS RECOMMENDATION #4-6

Redesign the Free File Software Lookup Tool to better direct taxpayers to software providers that best meet their circumstances.

IRS RESPONSE TO RECOMMENDATION: The current Free File Software Lookup Tool allows taxpayers to enter criteria such as age, Adjusted Gross Income, state of residence, and Earned Income Tax Credit or military pay received. The combinations of these criteria identify the specific companies that provide products to best fit the taxpayer’s needs. We will explore the feasibility of additional improvements that may better assist  the taxpayer in choosing a product that will meet their needs.

CORRECTIVE ACTION: The current Free File Software Lookup Tool allows taxpayers to enter criteria such as age, Adjusted Gross Income, state of residence, and Earned Income Tax Credit or military pay received. The combinations of these criteria identify the specific companies that provide products to best fit the taxpayer’s needs. We will explore the feasibility of additional improvements that may better assist  the taxpayer in choosing a product that will meet their needs.

TAS RESPONSE: The National Taxpayer Advocate appreciates that the IRS will explore ways to improve the Free File Software Lookup Tool. Taxpayers are sometimes confused when trying to navigate the website and determining which program is the best one for them. This tool, along with additional guidance provided to taxpayers, can help direct taxpayers to the correct programs that fit their needs and circumstances.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

7
7.

TAS RECOMMENDATION #4-7

Improve the capabilities offered to taxpayers through Free File Fillable Forms, including:

a. Linking from IRS form instructions to related IRS publications;
b. Providing increased guidance for common areas of taxpayer confusion;
c. Ensuring taxpayer’s abilities to download, save, and print all forms with troubleshooting assistance; and
d. Creating a dedicated email where taxpayers can get help when experiencing technology glitches.

IRS RESPONSE TO RECOMMENDATION: Free File, Inc. donates the Free File Fillable Forms tool for free and develops and maintains the program at no cost to the federal government. Free File Fillable Forms already offer links to the instructions for the Form 1040 and associated schedules. The IRS provides information on its help page on IRS.gov for taxpayers and publishes a user guide to help taxpayers navigate the tool. Further, the utility of the Free File Fillable Forms has been enhanced over the years with roll-over information on certain fields and drop-down selection options to restrict entry to only those options appropriate for specific information. Users of Free File Fillable Forms may download and save their returns on their computers and print their forms today. Some users do experience problems printing when they use an outdated internet browser or do not fill out the form completely. The IRS includes helpful information about minimum system requirements, including recommended browsers, and printing tips on IRS.gov. The IRS does provide a dedicated email address (wifreefilecs3@irs.gov) for taxpayers to report computer problems. The IRS responds with recommended solutions. This mailbox is made available within the self-help tools so that taxpayers may try to resolve their issue even if encountering a problem after business hours. We will work with FFI to explore the potential for additional capabilities to improve the customer experience.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate appreciates the benefits offered by Free Fillable Forms and the IRS’s provision of a dedicated email address and other support for taxpayers who experience problems. As she discussed in a blog post, the National Taxpayer Advocate found that the links to the instructions did not function properly when she herself tried to use them while preparing her returns. She appreciates that the IRS will work with FFI to explore the potential for additional capabilities to improve the customer service experience and continues to believe the above recommendations would improve the program.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

8
8.

TAS RECOMMENDATION #4-8

If the above recommendations are not substantially adopted, discontinue the Free File Program and create an improved electronic free fillable forms program including the features described in Recommendation 7.

IRS RESPONSE TO RECOMMENDATION: We have agreed to adopt substantial aspects of the recommendations above, thereby averting the condition on which this Recommendation relies.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate appreciates that the IRS has agreed to adopt substantial aspects of the recommendations above to make the Free File program better. The Free File program can serve as an important tool for many taxpayers, and the National Taxpayer Advocate looks forward to working with the IRS to implement necessary improvements, as well as oversight and testing, to Free File software and Free Fillable Forms.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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