After ProPublica sued the IRS, the agency released emails that show it has allowed the tax preparation industry to write the rules.
For a decade and a half, the IRS program to allow most Americans to file their taxes for free has been floundering.
Now, IRS emails obtained by ProPublica help show why: The agency has allowed the tax preparation industry to write the rules.
The IRS tried to hide the documents from public view, initially withholding more than 100 pages of emails between agency officials and industry representatives in response to ProPublica’s Freedom of Information Act request filed in April. The agency released the emails this month only after ProPublica sued.
This year, as part of our coverage of the IRS and TurboTax maker Intuit, we filed a request for correspondence between the IRS and the Free File Alliance, an industry group. The request sought records surrounding a public-private partnership called Free File.
Under that program, which has long been championed by Intuit, the IRS agrees not to create its own tax filing system that would pose a threat to the industry’s profits. In exchange, Intuit and several other tax prep companies agree to offer free tax filing to most Americans. But the program has been declining for years, with less than 3% of eligible Americans using it this year.
The email correspondence sheds light on a pivotal moment for the future of Free File in the fall of 2018: An expert body called the IRS Advisory Council (IRSAC) had spent months investigating the program. It was preparing to publish a blistering report concluding that the IRS’ “deficient oversight and performance standards for the Free File program put vulnerable taxpayers at risk.”
A draft of the report had been delivered to the IRS but not publicly released, as ProPublica previously reported. Just weeks before the scheduled release, Tim Hugo, the head of the Free File Alliance, and Stephen Ryan, its lawyer and a lobbyist for Intuit, reached out to the IRS with an “urgent” request to extend the program, even though it wasn’t expiring for another two years.
The newly released correspondence shows what happened next: Hugo emailed IRS officials a slate of potential changes to the memorandum of understanding that governs the program. The reforms — which, Hugo wrote, reflected IRS concerns — included restricting the industry’s ability to market paid services to Free File users.
“In return for these significant and valuable enhancements in the Free File Program, the Free File [Alliance] requests that the current Program be extended for one year to October 31, 2021,” Hugo wrote.
The emails are striking for what they lack: no counterproposals or efforts by IRS officials to push for a better deal. Less than two weeks after the industry proposal, the IRS official who oversees the program, Ken Corbin, signed a new memorandum of understanding.
The new deal reflected all of the industry’s proposals and contained no other significant changes. And it had been extended, just as the industry requested, to Oct. 31, 2021.
A spokesman for the Free File Alliance said in a statement that the group had discussed proposed changes with the IRS “for many months” before its push for changes last October.
“The notion that the Free File Alliance ‘dictated’ the terms … to the IRS is absolutely false,” the spokesman said. “When IRS decides on any issue, the agency gets what it desires. No one dictates to IRS.”
The IRS didn’t respond to questions.
When the IRS withheld the emails in response to ProPublica’s request this year, it cited an exemption to the Freedom of Information Act that protects internal deliberations among government officials. But the withheld emails were written by industry officials. After ProPublica sued in federal court, the agency dropped that objection and released the records.
In racing to sign the new memorandum of understanding, the tax prep industry got out in front of the advisory council’s critical report, which was released just two weeks later.
The industry solutions fell far short of IRSAC’s recommendations.
Those e-mails are owned by the tax-payers. Whoever tried to hide them needs to be tried, found guilty, fired and denied any benefits. So damn sick of this corruption that goes unpunished.