The Free File Alliance is a group of tax preparation companies which operate a public-private partnership with the

Internal Revenue Service The Internal Revenue Service (IRS) is the revenue service for the Federal government of the United States, United States federal government, which is responsible for collecting Taxation in the United States, U.S. federal taxes and administerin ...

(IRS) to provide free electronic tax filing services under the IRS Free File program to United States taxpayers meeting certain guidelines. The IRS stipulates filers must have an

adjusted gross income In the United States income tax system, adjusted gross income (AGI) is an individual's total gross income minus specific deductions. It is used to calculate taxable income, which is AGI minus allowances for personal exemptions and itemized d ...

(AGI) of $84,000 or less for tax year 2024 to qualify, but participating companies can set their own requirements and restrictions. The IRS Free File program is a compromise between the IRS and for-profit tax software companies that enables lower and middle-income filers to file their taxes for free while ensuring the IRS does not develop its own free-to-use tax software that would compete with private, for-profit tax software companies. Free File Alliance is a

501(c)(4) organization A 501(c) organization is a nonprofit organization in the Law of the United States#Federal law, federal law of the United States according to Internal Revenue Code (26 U.S.C. § 501(c)). Such organizations are exempt from some Taxation in the Un ...

registered as Free File, Inc., and based in

Clifton, Virginia Clifton is an List of towns in Virginia, incorporated town located in southwestern Fairfax County, Virginia, Fairfax County, Virginia, United States, with a population of 243 at the time of the 2020 United States census, 2020 census. Incor ...

. Its executive director is Tim Hugo. While many of the Free File Companies offer free state income tax returns, some companies do charge additional fees of $10 to $30 to electronically prepare state returns. As of the 2021 tax filing season, the two most used tax-filing software programs (TurboTax and H&R Block) no longer participate in the Free File program. With the two largest members of the Free File Alliance ending their participation in the Free File Program, there have been renewed calls for the IRS to develop and offer its own free tax-filing software to taxpayers. For tax-filing season 2024, the IRS announced a pilot of ''Direct File'', where people can calculate and submit their federal taxes and some state taxes in partnership with select state tax agencies for free. This initiative came as a result of the two largest members of the Free File Alliance ending their participation as well as the 2022

Inflation Reduction Act The Inflation Reduction Act of 2022 (IRA) is a United States federal law which aims to reduce the federal government budget deficit, lower prescription drug prices, and invest in domestic energy production while promoting clean energy. It was ...

, signed into law by President

Joe Biden Joseph Robinette Biden Jr. (born November 20, 1942) is an American politician who was the 46th president of the United States from 2021 to 2025. A member of the Democratic Party (United States), Democratic Party, he served as the 47th vice p ...

Current Alliance members

For tax year 2024, there were 8 participating Alliance members with the following requirements to qualify to use their software for free under the Free File program:
FreeTaxUSA.com
AGI of $48,000 or less (or less than $84,000 if active duty military). Free state return included.
Online Taxes at OLT.COM
AGI of $48,000 or less (or less than $84,000 if active duty military). Free state return included.
TaxAct.com
AGI of $84,000 or less AND age between 20 and 59 or active military. Free state return in some states.
TaxSlayer.com
AGI of $48,000 or less (or less than $84,000 if active duty military) or eligible for the Earned Income Tax Credit (EITC). Free state return in some states.
FileYourTaxes.com
AGI between $8,500 and $84,000 AND age 64 or younger or active duty military. Free state return in some states.

AGI of $76,000 or less AND resident of certain states (or less than $84,000 if active duty military) or eligible for the Earned Income Tax Credit (EITC). No free state returns.
ezTaxReturn.com
AGI of $84,000 or less AND age between 17 and 91 AND resident of certain states (or less than $84,000 if active duty military). No free state returns.
1040.com
AGI between $17,000 and $84,000 (or less than $84,000 if active duty military). Free state return in some states. The free state and federal tax filing services provided b
MyFreeTaxes
sponsored by the charitable organization

United Way United Way is an international network of over 1,800 local nonprofit organization, nonprofit fundraising affiliates. Prior to 2015, United Way was the largest nonprofit organization in the United States by donations from the public. Individual Un ...

, an
Cash App
which sells targeted advertising based on return data, are unrelated to the Free File program.

Criticism

Significant under-use

In a typical year, about 70% of filers (roughly 100 million people) are eligible to use Free File, but only about three million do, according to Tim Hugo, the FFA's executive director. 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.

Difficult to use

A 2019 audit of the Free File system by the

Treasury Inspector General for Tax Administration The Treasury Inspector General for Tax Administration (TIGTA) is an office in the United States Federal government. It was established in January 1999 in accordance with the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98) ...

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".

Deliberate efforts to hide Free File services

The Free File Alliance has taken deliberate steps to hide its free services so that most filers continue to use paid tax preparation services. Methods used by the FFA to hide its free services and steer filers towards paid services include deliberately hiding free services from

Google Google LLC (, ) is an American multinational corporation and technology company focusing on online advertising, search engine technology, cloud computing, computer software, quantum computing, e-commerce, consumer electronics, and artificial ...

search results, deceptively marketing commercial tax preparation services as free and then upselling users paid services even when they are eligible for Free File, not including links to Free File services on their websites ( TurboTax's Free File service, for instance, was not available on TurboTax.com), using

dark pattern A dark pattern (also known as a "deceptive design pattern") is a user interface that has been carefully crafted to trick users into doing things, such as buying overpriced insurance with their purchase or signing up for recurring bills. User exp ...

s to push users towards paid services, and using confusing naming practices (for example,

TurboTax TurboTax is a software package for preparation of American and Canadian income tax returns, produced by Intuit. TurboTax is a market leader in its product segment, competing with H&R Block Tax Software and TaxAct. TurboTax was developed by M ...

called its Free File service the "Freedom Edition").

Lobbying efforts

The Free File Alliance (FFA) was largely organized by

Intuit Intuit Inc. is an American multinational business software company that specializes in financial software. The company is headquartered in Mountain View, California, and the CEO is Sasan Goodarzi. Intuit's products include the tax preparati ...

, and guided by a former lobbyist for the company. In 2019,

ProPublica ProPublica (), legally Pro Publica, Inc., is a nonprofit investigative journalism organization based in New York City. ProPublica's investigations are conducted by its staff of full-time reporters, and the resulting stories are distributed to ne ...

reported that tax preparation agencies used the Free File Alliance to head off the potential "encroachment" by the

IRS The Internal Revenue Service (IRS) is the revenue service for the Federal government of the United States, United States federal government, which is responsible for collecting Taxation in the United States, U.S. federal taxes and administerin ...

, 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. Despite publicly announcing their support for the changes,

(the maker of TurboTax), as well as

H&R Block H&R Block, Inc., or H&R Block, is an American tax preparation company operating in Canada, the United States, and Australia. The company was founded in 1955 in Kansas City, Missouri, by brothers Henry W. Bloch and Richard Bloch. As of 2018, H&R ...

, announced that they would be leaving the Free File Alliance.

Paid ancillary services

In 2007, Alliance members agreed to remove controversial ancillary offerings such as

refund anticipation loans Refund anticipation loan (RAL) is a short-term consumer loan in the United States provided by a third party against an expected tax refund for the duration it takes the tax authority to pay the refund. The loan term was usually about two to three w ...

from the program, after half of Free File users making ancillary purchases stated their purchases were not intended.

References

{{reflist

External links

* http://www.freefilealliance.org/ Tax software of the United States Taxation in the United States Internal Revenue Service Public–private partnership projects in the United States 501(c)(4) nonprofit organizations Non-profit organizations based in Virginia