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Congress wants to prevent IRS from expanding its free online tax filing

Companies like Intuit and H&R Block have lobbied for years to prevent the agency from creating its own free electronic system, ProPublica reports.

Kimberly White/Getty Images

Democrats and Republicans in Congress are pushing to ban the Internal Revenue Service from creating a free system for filing taxes, according to a new report. 

Last week, members of the House Ways and Means Committee passed bipartisan legislation called the Taxpayer First Act, which prevents the IRS from creating an online tax filing system. For years, companies like Intuit, which makes TurboTax, and H&R Block have lobbied to keep the IRS from making its own free online system because it would threaten their profits, according to a ProPublica report published Tuesday.     

Taxpayers with incomes below $66,000 are eligible to file their taxes for free as part of a partnership between the IRS and Intuit, H&R Block and other companies. But only 3% of Americans do so every year, according to MarketWatch. 

The bill essentially maintains the status quo. Currently, the IRS has agreed to refrain from making its own filing system as long as a group of tax filing companies provide their free services to taxpayers making below the threshold income. Those companies are members of an industry group called the Free File Alliance. 

There have been several congressional efforts to make the deal between the IRS and the Free File Alliance law, according to ProPublica. The tax preparation industry has heavily lobbied in support of these efforts, with Intuit and H&R Block giving a total of $6.6 million in part to the IRS deal, according to the report. Rep. Richard Neal, a Democrat from Massachusetts and chairman of the Ways and Means Committee, reportedly received $16,000 in contributions from the two tax preparation companies during the last two elections.

CNET was unable to verify those contributions.

"We regularly engage with policymakers on matters that would benefit taxpayers, including the Taxpayer First Act, which would improve and modernize IRS service," a representative for H&R Block said. "We are proud of our work to provide free tax filing services to millions of taxpayers through the Free File Alliance."

The IRS didn't immediately respond to a request for comment. Intuit didn't directly address a request for comment on the ProPublica article, but pointed CNET to information on taxes including a company post.

First published April 9 at 3:37 p.m. PT.
Update, April 10: Adds Intuit's response.