Did you know that you may be eligible to file your income taxes online for free? If you make less than $66,000 a year you can take advantage of the services of the Free File Alliance, a consortium of companies including Intuit (TurboTax) and H&R Block that offers taxpayers the ability to use privately-created tax software to file income tax returns free and easily. But only 3% of taxpayers who are eligible to use that free software use it to file their tax returns. Why is that?
That free software is competition to paid software products such as TurboTax. The easier it is for taxpayers to file using free software, the less likely they are to pay for products such as TurboTax. So tax preparation companies try to actively minimize the publicity they give to those free filing products. And since most taxpayers won’t try to dig around to find free filing software themselves, they end up spending the money to buy TurboTax or use the services of H&R Block and other tax preparers.
The IRS has mulled the idea of creating its own free tax filing service, but tax preparers have long fought against that. If the IRS were to create its own service, it would cut down the demand for TurboTax and similar products, which would cut into tax preparers’ bottom lines. That’s a pretty sad state of affairs that private companies want to keep the government from trying to create a program that makes it easier to file taxes, just so that they can continue to make a profit.
But that unfortunately is the nature of so many businesses today. They’re not concerned with consumer well-being, just with making money. And when they make their money by helping people comply with complicated government forms and regulations, the more difficult those forms and regulations are to decipher, the better.
Those companies also have a lot of money to throw around to convince Congressmen not to allow the IRS to make things easier for taxpayers. So don’t be surprised to find legislation passed in the near future to prevent IRS from continuing to offer free filing services to more taxpayers.