If you use TurboTax and were planning to file your taxes for free through the Internal Revenue Service’s website, you may be in for a rude awakening: the tax-filing software business has announced that it will no longer use the agency’s Free File program going forward.
For many years, the IRS online program allowed information from TurboTax to be synced with the official system for free for filers earning less than $72,000 per year through the official system.
What’s the deal with the Free File?
While the larger corporation Intuit INTU secretly announced in July that it would be opting out of Free File, the announcement mostly went unnoticed until it was revived by USA Today earlier this month.
In a statement on the firm’s website, the company states that “Intuit has opted not to renew its participation in the IRS Free File Program and will no longer be delivering the IRS Free File Program supplied through TurboTax.”
Users who want to file their taxes with TurboTax (the company recently reported serving 100 million customers across TurboTax, QuickBooks, Mint, and Credit Karma) will have to pay for the software —
those with incomes below a certain threshold are eligible for a free version, and there is currently a promotion for others based on when they sign up and how simple their taxes are will have to pay for the software. Users will be required to complete the tax return on their own in order to use FreeFile.
The Internal Revenue Service has already warned that, as a result of a combination of the epidemic, budget cuts, and understaffing, Americans may experience significant delays in receiving their refunds this year. The agency is still dealing with a “backlog crisis” that resulted in a number of delays last year, notably for individuals who used the Free File system.
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The corporation cited “limitations of the Free File program” as well as a desire to “further innovate in ways that are not permissible under the present Free File parameters” as the primary reasons for terminating the agreement.
The Free File program was also terminated by H&R Block (HRB – Get the H&R Block, Inc. Report) in October 2020, which was another significant filing company.
In order to file this year, I need the following information.
Along with the income restriction, there were existing restrictions on who was eligible to submit for a free tax return. TurboTax’s free service is limited to simple tax returns, while more difficult filings (which are frequently required for small business owners) are subject to additional fees and require the assistance of an accountant.
It is not apparent whether this change will make it simpler or more difficult for eligible people to submit their taxes for free, despite Intuit’s statement that it “remains dedicated to free tax filing.”
Companies that make tax filing software appear to be fast transitioning to their own systems of filing — but customers accustomed to automatically filing with the IRS may find this year’s filing process to be a difficult transition to make.
What’s more, guiding people toward free tax-filing options isn’t always in the best interests of the companies that develop tax-filing software — in 2019, a series of articles from ProPublica highlighted how various tax prep companies have been attempting to sell paid options rather than guiding consumers toward free ones.
As the company explains, “this decision will allow us to focus on further innovating, including ways that are not permitted under the current Free File guidelines, and on better serving the complete financial health of all Americans through our entire portfolio of products and services, including tax preparation and beyond.”