More than 14 million American taxpayers paid for tax preparation software that should have been free, resulting in about one billion in revenue for tax software companies like H&R Block and Intuit, the maker of TurboTax. According to ProPublica, an audit from the Treasury Inspector General (IG) for Tax Administration revealed that 104 million taxpayers were eligible to file their taxes for free last year through the IRS’ Free File program—but only 2.4 percent of them did so. The IG found that so few people took advantage of the Free File program because it was “fraught with complexity and confusion” that IRS management didn't remedy. Tax software companies seemed to take advantage of the confusion, finding ways to direct people away from the Free File system and towards their paid programs.
The tax agency has since banned companies from hiding their free products on Google search, and scrapped their prohibition on creating their own online filing system—though it's not clear whether the IRS will actually create that system. An Intuit spokesman said the company “supported” efforts to strengthen the Free File program and claimed the “majority of eligible tax filers” using software were able to file “absolutely free through the Free File Program or using commercial products.”