Warren Asks Agencies to Probe Tax Companies’ Free-File Services

(Bloomberg) -- Senator Elizabeth Warren and other lawmakers asked the Internal Revenue Service and the Federal Trade Commission to investigate whether tax preparation companies are hiding their free services by manipulating search engines.

Warren, a Massachusetts Democrat and candidate for president, charged that companies, including H&R Block and Intuit Inc.’s TurboTax were deliberately directing taxpayers to their paid products and away from the preparation software available at no cost on the Free File Alliance website, a partnership between 12 companies and the IRS that was established in 2003.

She asked FTC Commissioner Joseph Simons to look into whether the companies “may have entered into an illegal agreement” to hide the free services.

“These companies’ actions in hiding Free File from search engine results -- and therefore from consumers -- in order to artificially inflate profits and deprive low-income consumers of a cheaper product merit investigation as unfair and deceptive practices,” she wrote in a letter to Simons on Thursday that was signed by 11 other Democratic senators and representatives, including two other 2020 presidential candidates, Cory Booker and Bernie Sanders.

In a separate letter, the lawmakers urged IRS Commissioner Charles Rettig to “dismiss the companies that have deliberately tried to cheat taxpayers” from the Free File program.

The IRS said in a statement that it is reviewing concerns related to the Free File program and will take “fast action” to ensure the integrity of the program. The FTC did not respond to a request for comment.

ProPublica, citing an internal document and employee accounts, reported last week that H&R Block and TurboTax had guided people away from their services that can be found on Free File toward software that charged fees.

Intuit and H&R Block have separately defended their support of the Free File program. H&R Block said it has updated the company’s website to make Free File and other no-cost filing options more easily searchable. Intuit said it has worked with the IRS in recent years to make the program more user-friendly, including eliminating pop-up ads and prompts to up-sell customers.

Warren, in the letter to Rettig, said that a congressional staff study had found that “this practice is more widespread than previously reported” and included other tax preparation firms.

Tax software through the Free File Alliance is available to taxpayers with an adjusted gross income of $66,000 a year or less. More than 53 million returns have been filed through the program since 2003, according to the alliance’s website, which cautions that “by going directly to a company’s website and not through the IRS.gov Free File pages, you may be charged a fee.”

Senator Ron Wyden of Oregon, the Finance Committee’s top Democrat, said last week that he plans to raise the marketing issue with the IRS.

Warren, in the letter to Rettig, said less than 2.5 percent of taxpayers used Free File in 2018, and she called it “a failure.”

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