Independent Review Calls Benefits of Public-Private Free Tax-Filing Partnership ‘Substantial,’ Allowing IRS to Avoid ‘Prohibitive Costs’

Kyle BurnsPress Releases

Report by MITRE, Non-Profit R&D Group, a ‘Vote of Confidence,’ Says Leader Of Commercial Tax Group; 53 Million Returns Prepared For Free, $1.6 Billion Saved

WASHINGTON, Oct. 8, 2019 — In an extensive independent review released today, a respected non-profit research institute gave an overall favorable assessment of the public-private partnership that has prepared millions of tax returns at no cost to low- and middle-income Americans.

IRS Free File, the partnership between the Internal Revenue Service and a group of commercial tax preparers called the Free File Alliance (now, officially Free File, Inc., or FFI), was launched 17 years ago. “The benefits of engaging in the current public-private partnership (PPP) with the Alliance appear to be substantial,” said the report, which runs 412 pages.

Without the partnership, the report continued, “IRS would sustain prohibitive costs in funding such a program itself, with added risk of competing with a highly competitive private sector.” 

‘IRS Has Fulfilled Its Directive…With Little Economic Burden’

Because of the partnership, said the report, “The IRS has fulfilled its directive from Treasury and OMB to increase free tax preparation services…with little economic burden to the agency by passing on the hefty cost of program development and implementation to the private sector.”

The report noted that “the program has resulted in more than 53 million free returns e-filed and an estimated $1.6 billion in savings to taxpayers.”

The Internal Revenue Service commissioned MITRE Corporation, a not-for-profit organization that operates federally funded research and development centers, to conduct an “independent assessment of the Free File program to ensure continued operations and integrity of the program.”

Tim Hugo, executive director of FFI, said, “The MITRE report is a vote of confidence in a highly successful program.” He called the assessment “a diligent, highly detailed endeavor that shows that

the partnership is working well.” He added, “We are continually working with the IRS to improve the program.”

MITRE: Private Sector Members Are Compliant With MOU, and IRS Is Meeting Its Objectives

The MITRE assessment included “a fact-finding review of each member to determine whether members were in compliance with the most recent version of the MOU at the time of the assessment.” The MOU, or Memorandum of Understanding, most recently renewed last year, governs the program.

“Overall, based on the various assessment workstreams, all Free File members were compliant with the MOU, in particular with Article 4, Standards of Practice,” said the report. Article 4  “outlines the expected level of service, software and website functionality, security, disclosure of forms and schedules. In addition, it includes taxpayer service options and other requirements such as innovation.”

In addition, the report said that the IRS was “meeting their currently articulated objectives for the internal administration of the program” – though MITRE suggested updating those objectives, which it said were “vestiges of the program’s founding.” The report added that “MITRE considers the IRS’s current compliance procedures adequate and effective to support the integrity of the program.”

‘High Degree of Member Compliance’

The report continued, “IRS’s existing oversight appears to be sufficient given the high degree of FFI member compliance.” Citing the program’s two objectives, the MITRE report concluded: “The program objective of providing the venue for free tax filing for 70 percent of the population has been met. The e-filing objective has been met.”