Grassley, Wyden urge IRS to review 'Free File' memo with tax-prep companies

Grassley, Wyden urge IRS to review 'Free File' memo with tax-prep companies
© Greg Nash

Senate Finance Committee Chairman Chuck GrassleyCharles (Chuck) Ernest GrassleyTrump administration to impose tariffs on French products in response to digital tax Big Ten moves to conference-only model for all fall sports Republicans considering an outdoor stadium for Florida convention: report MORE (R-Iowa) and ranking member Ron WydenRonald (Ron) Lee WydenTrump administration to impose tariffs on French products in response to digital tax Mnuchin: Next stimulus bill must cap jobless benefits at 100 percent of previous income Congress must act now to fix a Social Security COVID-19 glitch and expand, not cut, benefits MORE (D-Ore.) on Monday urged the IRS to "take any actions necessary" to ensure that its "Free File" program fulfills its intended purpose, after the agency announced that it is reviewing concerns about the program.

"We request that you review the IRS’ memorandum of understanding with the program’s participants ... to ensure industry compliance, and take any necessary actions to ensure the integrity and purpose of the Free File program, including amending the memorandum as necessary to bar whatever deceptive acts and practices the IRS might uncover as a result of its investigation," the senators said in a letter to IRS Commissioner Charles Rettig.

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The letter is the latest example of lawmakers in the past two weeks pressing the IRS to take actions relating to the Free File program, and is notable in that it came from both the top Republican and the top Democrat on the Senate's tax-writing committee. Other letters have not had Republican signatories.

Under the Free File program, the IRS partners with tax preparation companies and those companies offer free tax filing software to low- and middle-income taxpayers. ProPublica, an investigative news outlet, has recently written a number of articles reporting that the tax prep companies who participate in the program have taken steps to hide their free options, prompting lawmakers to raise concerns.

The IRS said in a statement late Friday that it has assembled a senior leadership team to review program.

Intuit, producer of the tax prep service TurboTax, said that its actions have been "both appropriate and consistent with our values."

"Any suggestion that Intuit does not support the IRS Free File Program is flat wrong," the company said. "We look forward to working with the IRS and private industry to improve the Free File program and help it continue to grow."

Another tax prep company, H&R block, said in a statement that it supports "the review of the program by the IRS, as called for by Chairman Grassley, Ranking Member Wyden and the IRS, and we look forward to participating in the review."

Grassley and Wyden said that after the IRS reviews the allegations about deceptive practices by tax prep companies, it should also review its memorandum of understanding with the companies.

"The IRS should take this opportunity to reevaluate whatever agreement it might have with the Free File Alliance to maximize the efforts of marketing the Free File program to eligible U.S. taxpayers, regardless of how those efforts are shared between the IRS and the Free File Alliance going forward," the lawmakers said.

The senators said that "if participants of the Free File program are actively inhibiting the ability of taxpayers to file for free, corrective action must be taken so that the entire program better serves low- and middle-income taxpayers." They said that's particularly important because the tax prep companies play a key role in ensuring that taxpayers' information is protected from identity thieves and cyber criminals. 

"We cannot afford for allegations of deceptive acts and practices to impede the continued work of the Security Summit, as protecting the security of all taxpayer information is of the utmost importance," they wrote.

Updated on May 7 at 8:38 a.m.