Five tax preparation companies deliberately withheld information about free programs available to eligible disadvantaged taxpayers in an effort to sell customers to pay for their services, the New York State Department of Financial Services said on Wednesday.
The state regulator concluded in a report, released by the tax filing deadline, after a year-long investigation that Intuit, which is the maker of TurboTax, H&R Block, TaxSlayer, TaxHawk, and Drake Enterprises, became involved in ” unfair and abusive practices. ” that undermined the Free File Program of the United States International Tax Service (IRS) aimed at helping disadvantaged taxpayers.
The department said its report found that the five companies “deliberately hid the website’s landing pages” for the free program, and said doing so led to “absolute low participation in the program.” Only 2.5 million out of 100 million eligible taxpayers used the free IRS program last year, according to the New York State regular newspaper.
“The Free File program doesn’t work and was exploited by commercial tax preparation companies to generate their own profits at the expense of low-income taxpayers. This is yet another blow to public confidence, “New York Superintendent of Financial Services Linda A. Lacewell said in a statement.” Consumers who needed a simple, no-cost means to file their taxes were left out in the cold. We call on the federal government to work with the states to develop a fair, accessible, and modern tax filing system. “
The investigation began in 2019 after a report by ProPublica in April 2019 that TurboTax hid its Free File page from search engines.
In December, the IRS and the tax preparation companies participating in the Free File program updated their agreement to prohibit companies from excluding their Free File home pages in Internet search results. The IRS has reported a significant increase in the use of Free File this year.
Drake voluntarily dropped out of the Free File show in 2019. H&R Block has said it plans to drop out of the show after this year’s presentation season.
A report released by an IRS contractor last year had similar findings about companies that prevent search engines from including their Free File websites in search results.
The state regulator found that the five tax preparation companies “de-indexed,” or deliberately edited the code, on their landing pages under the program to hide those landing pages from taxpayers during search engine results. The companies also created and marketed their own products as “free” in an effort to attract customers outside of the free IRS program, according to the regulator.
The state regulator also said the IRS provided insufficient oversight, financing and marketing of the Free File program.
Spokesmen for the five grooming companies, Intuit, H&R Block, TaxSlayer, TaxHawk, and Drake Enterprises, and the IRS were not immediately available for comment.
Updated: 9:34 pm
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