U.S. Tax Firms Under Scrutiny For Scamming Clients

Leading tax preparation companies have invested $90 million in lobbying efforts concerning the Free File Program and related issues since the program’s inception in 2003, according to Anna Massoglia's report for OpenSecrets.

The coalition of tax prep firms, known as the Free File Alliance, reached an agreement with the IRS to offer free tax preparation services to a larger segment of taxpayers starting in 2003.

Now, these lobbying juggernauts are facing increased scrutiny from members of Congress due to their use of "revolving door" lobbyists to hinder the implementation of a government-run system that would allow taxpayers to file for free.

The coalition of tax prep firms, known as the Free File Alliance, reached an agreement with the IRS to offer free tax preparation services to a larger segment of taxpayers starting in 2003.

This agreement, driven by Intuit lobbyists, required firms to provide some tax filing services at no cost to specific individuals, but these companies could still charge for ancillary services and other tax filing products.

In December 2019, an addendum to the alliance’s original memorandum of understanding lifted that restriction, despite significant lobbying efforts by tax prep companies to prevent the government from creating its own e-filing software.

The addendum also prohibited tax prep firms in the alliance from blocking Free File Internet search results.

This change followed reports that tax prep companies within the alliance redirected users to paid products, including those marketed as “free,” while concealing Free File options from Google results.

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