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How Do You File Your Tax Return?

The Government Accountability Office (GAO) published a report this week on the IRS Free File program and the methods that taxpayers use when filing returns. On April 12, 2022, the IRS had received 1.83 million Free File returns. This is approximately 1 million fewer than the 2.85 million returns received at the same point in the prior year filing season. The reduced use of Free File is explained in part by the two largest tax return companies no longer participating in the program.

In 2020, H & R Block exited the program. This was followed by the departure in 2021 of Intuit, the parent company of the popular TurboTax program. The two major tax software providers had previously been selected by 70% of Free File users.

While there has been greater use of other tax software providers from the Free File Alliance, the "data shows that none of the current participating companies have replaced the volume of Free File users who previously used the Intuit website."

The GAO report indicates that the IRS should make plans for changes in the future. It states, "While the long history of the Free File program may make IRS officials believe it will continue, assuming that a program will continue is risky. By not managing these risks through the development of additional free online filing options for taxpayers, IRS may be unable to achieve its strategic goal to empower all taxpayers to meet their tax obligations."

The GAO suggested the IRS may want to consider developing other options, such as its own preparation software. The IRS has been reluctant to offer a public free filing option. The GAO noted that it may be difficult to build a high–quality software, but the IRS "may be understating its potential to improve certain aspects of the taxpayer experience."

The GAO report outlined the general usage of different tax filing methods by individuals. Those taxpayers with incomes under $72,000 qualify for the Free File program.

Taxpayer Filing Methods Per 100 Individuals

Number of Taxpayers
Filing Income Filing Method
29 Over $72,000+ Tax Preparer or Self-Prepared with Tax Software
35 Under $72,000 Paid Tax Preparer
22 Under $72,000 Self–Prepared with Tax Software
7 Under $72,000 Refund Anticipation Loan
3 Under $72,000 Paper Tax Return
1 Under $72,000 Volunteer Inc. Tax Assist./Tax Counseling Elderly
Under $72,000 Free File Program

Editor's Note: The IRS has been reluctant to develop a public free file software system. The companies with popular systems have two decades of software experience and it will be quite challenging for the IRS to provide a competitive product.

Published April 29, 2022
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