About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 1 (January 22, 2024)

handle is hein.crs/goveobp0001 and id is 1 raw text is: Congres &cna2 fRes anfrming Ih leg ilive deba Updated January 22, 2024 The Internal Revenue Service's Free File Program (FFP): Current Status and Policy Issues The Internal Revenue Service first allowed individual income tax returns to be filed electronically (e-filed) through a pilot program that began in 1986 and involved five tax preparers. Since then, e-filing has grown to the point that 92% of individual tax returns for the 2021 tax year were e-filed. E-filing has advantages for both tax administrators and taxpayers. For the former, e-filing substantially lowers the cost of processing returns and entails lower error rates, relative to paper returns. For the latter, e-filing allows individuals to receive a tax refund sooner than they would with a paper return. The IRS has been promoting e-filing by individuals, businesses, and tax practitioners since the late 1990s. A key part of this effort is the Free File Program (FFP). The FFP makes it possible for individuals, regardless of their filing status, with adjusted gross incomes (AGIs) at or below a specified amount ($79,000 in the 2023 tax year) to e-file their federal income tax returns, free of charge, using software provided by participating tax preparation companies. There are seven such companies at the start of the 2024 filing season. The IRS provides a secure portal on its website for eligible taxpayers to access the FFP. Taxpayers with AGIs above the FFP limit may e-file their returns, free of charge, through the same portal, using the Free File Fillable Forms, which are electronic versions of tax forms and schedules that offer no filing assistance. Origin of the FFP The FFP originated through two sources. One was the IRS Restructuring and Reform Act of 1998 (RRA, P.L. 105- 206). The act directed the IRS to increase the share of e- filed individual returns to 80% by 2007 from 23% in 1998 with assistance from the private sector. A second source was a 2001 directive issued by the Office of Management and Budget's (OMB's) Quicksilver Task Force implementing President George W. Bush's E- Government Initiative. One of the 24 projects chosen by the task force was the EZ Tax Filing Initiative. It was intended to increase the probability of the IRS achieving an 80% individual e-filing rate by 2007 by allowing paper filers to e-file their returns free of charge through a partnership between the IRS and tax software companies. Initially, the IRS tried achieving the aims of the Initiative by developing digitized versions of Form 1040 (and its schedules and instructions) that could be accessed at no cost through WhiteHouse.gov. When it became apparent that the IRS would be unable to complete such a project anytime soon, Treasury Secretary Paul O'Neill asked IRS Commissioner Charles Rossetti in January 2002 to establish a partnership with tax software companies to develop a free online filing system that would be managed by the IRS for low-income taxpayers, who were most likely to file paper returns. The resulting private-public partnership was initially called the Free File Alliance (FFA); it is now known as Free File, Inc. (FFI). The IRS did not achieve its 2007 e-filing goal until 2012, when 83% of individual returns were e-filed. Structure an d Evolution of the FFP The FFP began when the IRS signed an agreement with the 17 original FFI member companies on October 30, 2002. The agreement laid down a clear division of authority and responsibility between the IRS and the member companies. It required the companies to provide their tax preparation and filing services through IRS.gov at no cost to 60% or more of individual taxpayers, ranked by AGI. The companies set the eligibility requirements for free filing, based on age, income, and state residence. To join the FFP, each company had to prove that it was capable of providing such a service to at least 10% of individual filers. The agreement made the IRS responsible for enforcing member company compliance with the terms of the agreement. The agency had the authority to cancel the agreement with one year's advance notice, if it determined that most member companies were providing too little coverage. A controversial element of the agreement was a commitment by the IRS to not compete in the market for tax filing and preparation. Preventing the IRS from becoming a competitor was a major incentive for tax software companies to create and participate in the FFP. The IRS and FFI have extended and revised the original agreement five times. These subsequent agreements are linked to nine memoranda of understanding (MOU), which serve to implement the revised agreements. The second agreement (2005) reduced the range of free services a company could offer to eligible taxpayers; this meant that member companies could no longer offer refund anticipation loans to FFP taxpayers. In addition, the agreement stipulated that no member company could serve more than 50% of such taxpayers, and increased the share of taxpayers eligible for free filing through the FFP to the bottom 70% of individuals ranked by AGI.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most