A deal in the US between the IRS, the country's tax authority, and private tax filing companies is reportedly unraveling in the Congress amid reports of unethical behavior by the firms in question.
ProPublica cites Congressional staffers and media reports to say that the plan to allow private firms, such as Intuit, who are behind the TurboTax software, to keep offering the Free File program to taxpayers may have fallen through.
Under the deal, the IRS stands out of the way of these companies by not offering its own free filing service. But the companies, such as Intuit, have been found to be apparently intentionally directing many Americans toward paid tax filing solutions – even if they are eligible to use the free option. The way these companies reportedly achieved the goal includes manipulating the code to hide free option landing pages from search engines.
And according to the Free File Alliance, 70 percent of American makes less than $66,000 a year and are eligible to file their taxes free of charge – but only 3 percent take advantage of that. In other words, it's a very profitable industry.
Intuit is aware of the potential goldmine – when it is coupled with the way they have been implementing the deal with the IRS thus far – and last year spent $2.6 billion lobbying to keep the Free File program alive.
Politico said that the tax reform bill – Tax Payers First Act – that had support from both the Republicans and the Democrats, could next week be up for a vote in the House – minus the controversial Free File portion of it, whose reputation has been tarnished over the past few months.
But the likelihood that it won't be written into law doesn't mean that the deal between the IRS and the private tax filing industry will be immediately scrapped, as it is regulated by a memorandum of understanding, valid until 2021.
Meanwhile, the IRS – which, had the Free File deal been incorporated into the legal system, would've been banned from developing and offering its own free filing option to citizens – is reviewing the program.