Free-File Software Can't Handle Even Simple Returns • TaxProf Blog

The Treasury Inspector General for Tax Administration has issued a report slamming the IRS’s Free-File Program, charging that the electronic-filing software is replete with errors that affect even the simplest tax returns. (The Free-File Program allows 70% of all taxpayers — those earning $52,000 or less — to prepare and electronically file their returns free of charge using software provided by private companies selected by the IRS.) In response to the report, the IRS says it lacks authority to test the software for errors and, in any event, it would be impossible to do so. The leaders of the Senate Finance Committee were sharply critical of the IRS:

Chairman Max Baucus: "When the IRS refers taxpayers to an online filing service, those taxpayers have a right to expect accurate tax preparation. If the IRS really doesn’t have the authority to require its Free File partners to get the software right, then they’ve got a bad agreement with these companies that doesn’t protect taxpayers as it should. … [T]his report underscores the need for a direct filing portal on the IRS website, where the agency makes certain that the tools supplied to taxpayers comply with the tax code.”
Ranking Member Charles Grassley: "This is frustrating for Congress and taxpayers alike. We’re in the digital age. … But we can’t get a free electronic filing option for taxpayers to work right. Some of these software programs can’t properly compute a tax return using common basic scenarios. Reliability and accuracy are a problem.Taxpayers have every reason to question whether they’d be better off with a pencil and an abacus than using the current free-file program."

Report: Additional Action Is Needed to Expand the Use and Improve the Administration of the Free File Program (2007-40-105) (6/28/07)