IRS advisory committee calls on agency to assess public awareness of existing free file tools

An Internal Revenue Service advisory committee has said the agency should evaluate the cost of expanding awareness of existing free tax filing programs before developing a new filing tool for taxpayers.

In a report published on Tuesday, the Electronic Tax Administration Advisory Committee (ETAAC) called on the tax authority to assess how much it would cost to improve public understanding of commonly used services run by the Free File Alliance, the Volunteer Income Tax Assistance program and the Tax Counseling for the Elderly.

The intervention comes as the Internal Revenue Service and the U.S. Digital Service work to develop a prototype free filing service, which is expected to be made available to certain taxpayers in January 2024.

ETAAC is an advisory committee that provides a public forum for the discussion of electronic tax administration issues. Last September the committee appointed eight new members including Deputy Chief Financial Officer and Tax Commissioner for the District of Columbia Keith Richardson and Code for America Senior Manager RaeAnn Pilarski.

In the new report, the committee cited previous work by the nonprofit MITRE Corp., which identified low participation rates in existing free filing programs and found a low level of awareness among consumers. In 2018, just 3 million out of nearly 104 million eligible taxpayers used a free file product to submit their federal income tax returns, according to the MITRE study.

The committee said: “ETAAC reiterates MITRE’s conclusion and joins in the recommendation that Congress appropriate funds to increase awareness of existing free filing options and encourages the IRS to make use of free electronic filing resources already at its disposal to promote greater adoption of Free File.”

It added: “ETAAC further recommends that the IRS work with the Free File Alliance and other software industry associations to continue enhancing the Free File program. This could include expanding eligibility (in terms of adjusted gross income) and communication and marketing opportunities for the program.”

Details of the IRS’s new prototype tax filing platform were first reported by the Washington Post as the Treasury in May delivered a report to Congress on the feasibility of building such a service. That study was carried on behalf of the IRS by the nonprofit New America and was funded with $15 million included in the Inflation Reduction Act.

Other new recommendations from ETAAC include that IRS make tax information documents digitally available in real-time to allow easier use of third-party filing software and that the agency prioritize and allocate funding for the modernization of IRS.gov and search engine optimization.