The Future of Tax Filing: What the End of IRS Free Services Means for You
The Trump administration’s 2019 decision to phase out the IRS Free File program—a two-decade-old initiative offering free tax preparation to 70% of Americans—has left millions scrambling for affordable alternatives. As the program officially winds down in 2024, taxpayers earning under $73,000 annually face new costs and complexities in a system critics say favors corporate tax-prep giants. Here’s how the change impacts you and what options remain.
Why the IRS Free File Program Disappeared
Launched in 2003 through a public-private partnership, Free File allowed eligible taxpayers to electronically submit returns at no cost via IRS-approved commercial software providers. Though participation was voluntary for companies, a 2022 Treasury Inspector General report revealed only 3% of eligible taxpayers used it in 2021—a decline attributed to industry efforts to bury Free File options beneath paid offerings.
“This was death by a thousand paper cuts,” said former IRS commissioner John Koskinen. “Companies met their contractual obligations technically while steering users toward premium products.” Intuit (TurboTax) and H&R Block—which controlled 70% of the market—paid $141 million in 2022 settlements after allegations they deliberately hid Free File options.
The Ripple Effects on Taxpayers
With Free File’s demise, an estimated 17 million Americans who previously qualified must now:
- Pay $50-$150 for basic e-filing software
- Visit brick-and-mortar preparers (averaging $220 per return)
- Risk errors with manual paper filings
Low-income households face disproportionate burdens. A 2023 National Consumer Law Center study found 40% of Free File users had incomes below $30,000. “This creates a regressive ‘poverty penalty,’” said advocacy director Chi Chi Wu. “Families living paycheck to paycheck may delay filing or skip credits like the EITC over preparation costs.”
Alternative Solutions Emerging
Some states and nonprofits are stepping into the gap:
- 12 states including California and New York now offer state-run free e-file portals
- IRS Volunteer Income Tax Assistance (VITA) programs provide free help for incomes under $60,000
- Nonprofit platforms like FreeTaxUSA offer federal returns at no cost (state filings require fees)
However, coverage remains patchy. “VITA sites are overwhelmed, often with month-long waits,” noted Boston University tax policy professor Emily Gallagher. “And most state systems don’t integrate federal filings, creating duplicate work.”
The Corporate Tax Prep Landscape
Major providers have rolled out limited free tiers, but with caveats:
- TurboTax Free Edition excludes gig workers, itemized deductions, and investment income
- H&R Block’s free version disqualifies unemployment income or health savings accounts
Meanwhile, industry lobbying continues. OpenSecrets reports Intuit and H&R Block spent $13.6 million combined in 2023 to oppose legislation like the Tax Filing Simplification Act, which would mandate IRS-developed free software.
What Taxpayers Should Do Now
Experts recommend these steps before 2024 filings:
- Check eligibility for remaining free options at IRS.gov/freefile
- Research state-specific programs (e.g., CalFile in California)
- Bookmark IRS Direct File—a pilot program expanding to 13 states in 2024
“The silver lining is this disruption has forced a conversation about modernizing our archaic tax system,” said National Taxpayer Advocate Erin Collins. “But until structural changes happen, Americans need to be savvier about navigating the new reality.”
As Congress debates long-term reforms, taxpayers face immediate choices between cost, convenience, and compliance. One certainty remains: reading the fine print on “free” offers will be more crucial than ever.
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