Free File Program Expected to Grow Despite ACA

The Internal Revenue Service’s Free File program, which the IRS operates in conjunction with tax prep software providers, could well entice more taxpayers to self-file this tax season, despite new challenges like the Affordable Care Act.

“We did over 3 million tax returns last year, and we’ve done over 43 million tax returns in the last decade, so we’re very hopeful we’ll have a good year,” said Tim Hugo, executive director of the Free File Alliance, in an interview last week with Accounting Today. “It’s off to a good start, uneventful, which for us is the best kind of season you would have.”

IRS officials told him last week that the program has been running smoothly so far, but statistics were not available as of press time. The Free File service opened on Jan. 16. Individuals or families with 2014 adjusted gross incomes of $60,000 or less can use Free File software. Free File Fillable Forms, the electronic version of IRS paper forms, has no income restrictions.

“We’ve got 14 companies again providing service,” said Hugo. “We tell everybody it’s the easiest way to get your taxes done, and the quickest way to get your refund back. We’re very hopeful we’ll have a good season. We’ve added two new forms to accommodate the Affordable Care Act, the 8962 and the 8965, and we’re working with the IRS to try to make it easier for the taxpayer as they comply with the Affordable Care Act.”

Hugo believes that most taxpayers will be able to cope with the new requirements of the health care law.

“Free File is analogous to the identical programs that these companies have in their commercial products,” he said. “The point is to make it easy. We go out of our way to walk you through these programs and walk you through your tax return so we’ve made every attempt to accommodate the Affordable Care Act. So far, so good. We hope that continues right through April 15.”

Hugo isn’t discounting the efforts of tax professionals in aiding clients this tax season, though.

“Everybody’s going to make their own decision,” he said. “The professional preparers do a great job also and they perform a tremendous service for the taxpayer. This is just another service and another option that we provide, and we provide it in conjunction with the IRS. It’s a public-private partnership that we think has saved the taxpayer a billion dollars and saved the IRS and the government a lot of money too.”

So far, he hasn’t seen a spike in taxpayers checking out the site, despite a controversy earlier this tax season when Intuit raised the price for TurboTax customers who needed to file certain tax schedules. Intuit has since apologized and is offering a $25 discount to the customers who are affected.

“Our numbers continue to be steady,” said Hugo. “Last year we had some good growth. We’re hopeful we’ll have good growth again this year.”

The number of tax software companies in the Free File Alliance remained 14 this year, the same as last year, although one of the companies from last year dropped out and another tax prep provider—Jackson Hewitt—joined the program. Most of the major vendors remain part of the program, including H&R Block, Intuit, Liberty Tax Service, TaxAct and TaxSlayer.

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