Fairmark: Ban Free File Age Bias

Protest letter sent to taxwriters

By Kaye A. Thomas
Posted February 13, 2008
Updated February 20, 2008

Prepare and file your return online free of charge

Accounting for Active Traders

Schedule D made easy

Some companies participating in the Free File program administered by the IRS charge seniors for services that are free to others.

For several years the IRS has administered a program called Free File, making it possible for some taxpayers to prepare and file their tax returns online without paying for the service. When we prepared our Free File Survival Guide this year we were struck by the program's overt discrimination against older taxpayers, many of whom are excluded from using the better known companies unless they pay for services that are free to younger taxpayers. Below is the text of a letter we sent to the leaders of the congressional committees responsible for writing our tax laws.

Update

TaxACT, mentioned in the message below, offers free online tax return preparation and filing without an age or income restriction through their website. While we object to their use of an age restriction in Free File offerings, we recommend the unrestricted offering they make through TaxACT.com.

February 12, 2008

The Honorable Charles B. Rangel
Chairman, House Committee on Ways and Means
2354 Rayburn House Office Building
Washington, DC 20515

The Honorable James McCrery
Ranking Member, House Committee on Ways and Means
2354 Rayburn House Office Building
Washington, DC 20515

The Honorable Max S. Baucus
Chairman, Senate Committee on Finance
511 Hart Senate Office Building
Washington, DC 20510

The Honorable Charles E. Grassley
Ranking Member, Senate Committee on Finance
135 Hart Senate Building
Washington, DC 20510

          Re: Age discrimination in IRS Free File program

Dear Sirs:

We maintain a website providing tax news and guidance,[1] and each year we review the Free File program administered by the Internal Revenue Service. The decision whether to recommend Free File is always a difficult one, as the program is intentionally designed to be limited in scope and inconvenient to use. Plainly the dominant consideration in the design of the program is protecting the revenues of the software companies that participate, to the detriment of taxpayers and the government. Many of the program’s flaws are well documented, particularly in a report issued in June 2007 by the Treasury Inspector General for Tax Administration (the “TIGTA report”). I am writing to call your attention to one aspect of the program that has attracted little notice: discrimination against older Americans.

This program permits participating companies to limit their offerings on the basis of age. A number of the companies, including two of the leading ones, set an upper age limit. H&R Block’s offering is not available to taxpayers over age 50, and TaxACT’s offering is not available to taxpayers over age 54. Older Americans with a preference for one of these companies must pay for a service that is free to younger Americans.

The availability of other alternatives within the Free File program does not justify this limitation on the choices of seniors. None of the leading companies offers its Free File service to seniors with income above $30,000. Taxpayers may be justifiably reluctant to entrust their personal financial information and tax filing to a company that has miniscule market share and an unknown track record, particularly in light of problems identified in the TIGTA report, which include a finding that Free File software did not always accurately calculate taxes due.

It is difficult to understand why overt age discrimination would be permitted in a program administered by a federal agency. On its face, this feature of the program violates the spirit if not the letter of the Age Discrimination Act of 1975.

It appears we will have to live with the Free File program’s many other serious flaws for some time. Can we at least eliminate this one?

Very truly yours,

Kaye A. Thomas

[1] Our website at www.fairmark.com is offered as a free service supported by advertising revenues. This letter is not submitted on behalf of any client or organization.

Related