Mark Van Scyoc / Shutterstock.com

The IRS Tried to Hide Emails That Show Tax Industry Influence Over Free File Program

After ProPublica sued the IRS, the agency released emails that show it has allowed the tax preparation industry to write the rules.

For a decade and a half, the IRS program to allow most Americans to file their taxes for free has been floundering.

Now, IRS emails obtained by ProPublica help show why: The agency has allowed the tax preparation industry to write the rules.

The IRS tried to hide the documents from public view, initially withholding more than 100 pages of emails between agency officials and industry representatives in response to ProPublica’s Freedom of Information Act request filed in April. The agency released the emails this month only after ProPublica sued.

This year, as part of our coverage of the IRS and TurboTax maker Intuit, we filed a request for correspondence between the IRS and the Free File Alliance, an industry group. The request sought records surrounding a public-private partnership called Free File.

Under that program, which has long been championed by Intuit, the IRS agrees not to create its own tax filing system that would pose a threat to the industry’s profits. In exchange, Intuit and several other tax prep companies agree to offer free tax filing to most Americans. But the program has been declining for years, with less than 3% of eligible Americans using it this year.

The email correspondence sheds light on a pivotal moment for the future of Free File in the fall of 2018: An expert body called the IRS Advisory Council (IRSAC) had spent months investigating the program. It was preparing to publish a blistering report concluding that the IRS’ “deficient oversight and performance standards for the Free File program put vulnerable taxpayers at risk.”

A draft of the report had been delivered to the IRS but not publicly released, as ProPublica previously reported. Just weeks before the scheduled release, Tim Hugo, the head of the Free File Alliance, and Stephen Ryan, its lawyer and a lobbyist for Intuit, reached out to the IRS with an “urgent” request to extend the program, even though it wasn’t expiring for another two years.

The newly released correspondence shows what happened next: Hugo emailed IRS officials a slate of potential changes to the memorandum of understanding that governs the program. The reforms — which, Hugo wrote, reflected IRS concerns — included restricting the industry’s ability to market paid services to Free File users.

“In return for these significant and valuable enhancements in the Free File Program, the Free File [Alliance] requests that the current Program be extended for one year to October 31, 2021,” Hugo wrote.

The emails are striking for what they lack: no counterproposals or efforts by IRS officials to push for a better deal. Less than two weeks after the industry proposal, the IRS official who oversees the program, Ken Corbin, signed a new memorandum of understanding.

The new deal reflected all of the industry’s proposals and contained no other significant changes. And it had been extended, just as the industry requested, to Oct. 31, 2021.

A spokesman for the Free File Alliance said in a statement that the group had discussed proposed changes with the IRS “for many months” before its push for changes last October.

“The notion that the Free File Alliance ‘dictated’ the terms ... to the IRS is absolutely false,” the spokesman said. “When IRS decides on any issue, the agency gets what it desires. No one dictates to IRS.”

The IRS didn’t respond to questions.

When the IRS withheld the emails in response to ProPublica’s request this year, it cited an exemption to the Freedom of Information Act that protects internal deliberations among government officials. But the withheld emails were written by industry officials. After ProPublica sued in federal court, the agency dropped that objection and released the records.

In racing to sign the new memorandum of understanding, the tax prep industry got out in front of the advisory council’s critical report, which was released just two weeks later.

The industry solutions fell far short of IRSAC’s recommendations.

The council thought, for example, that the IRS wasn’t doing enough to oversee the tax prep companies and recommended that an outside auditor conduct an “objective and transparent” review of each company’s practices.

The industry proposed something far more modest, which became part of the new agreement. Instead of an outside auditor, the IRS and the industry group agreed to work together to perform reviews. There is also no provision for making the results of the reviews public.

One big problem with the Free File program, the IRSAC report said, was that few people know it exists. It’s the IRS’ responsibility, under the Free File agreement, to advertise the program, but the IRS hasn’t had an advertising budget for years. IRSAC recommended that the tax prep companies pony up money to promote the program. Neither the industry’s proposed revisions, nor the ultimate deal the IRS signed, had anything along those lines.

It was far from the first time that the industry had tweaked the program in response to criticism. While the industry has often had an ally in the IRS, consumer advocates have assailed the program. In response, Intuit’s strategy has been to keep “government out of the game,” as a 2007 PowerPoint slide prepared for an Intuit board of directors meeting put it. The company embraces changes that it deems palatable in order to make Free File seem like an adequate alternative to the IRS building a free tax filing system. “Focus on ‘good enough’ to fight off government encroachment,” said the PowerPoint, which was obtained by ProPublica.

Going back to the mid-2000s, the industry has agreed to modify the Free File program several times. Generally, the changes have, bit by bit, restricted the ways that tax prep companies could make money off people eligible for Free File. Back in 2005, the companies could pitch any sort of product, even ones that had nothing to do with taxes, like mortgages. The changes last year finally banned pitching any paid product other than a state tax return. These restrictions have had little effect because Intuit has been successful in steering people to a similarly named program, Free Edition, that its website markets as free, but then customers are often charged.

The newly released records also show the Free File Alliance aggressively attacking a prominent critic of the program, University of California, Davis, law professor Dennis Ventry, who was the chair of the IRS Advisory Council.

In a July 2018 email that was previously redacted by the IRS, Hugo complained to agency officials that Ventry was seeking to “inflame partisan politics in Congress against IRS” by publicly criticizing Free File and trying to meet with members of Congress.

“It is black letter law that it is illegal for U.S. government funds to be used to lobby. I believe IRS may have a duty to prohibit reimbursement of Mr. Ventry’s travel expenses if his trip includes any such lobbying visits,” Hugo wrote. Asked about the email, the Free File Alliance spokesman told ProPublica, “If reimbursed by the government, such trips for lobbying are totally inappropriate.”

Ventry, who said his expenses were reimbursed, told ProPublica the criticism was “patently absurd.” Pursuing multiple matters is standard practice when traveling to Washington as an advisory council member, he said.

This article was originally published in ProPublica. It has been republished under the Creative Commons license.  ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for their newsletter.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.