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On the Blog: Good News for Low Income Taxpayers

By / 10.15.2019

IRS Free File and VITA programs should be improved not discarded.

According to the Internal Revenue Service (IRS), 90 percent of taxpayers hire paid tax preparers or utilize tax preparation software to file their taxes.

For low-income families the cost of tax preparation can significantly reduce the value of their refunds. A 2016 study by the Progressive Policy Institute (PPI) found that low-income taxpayers in the Washington-Baltimore metropolitan areas can expect to spend between 13 and 22 percent of the average Earned Income Tax Credit (EITC) refund when using tax preparation services.

One way working families can give themselves a “tax break” is to take advantage of the IRS Free File program. This public private partnership between the IRS and the software industry makes free online tax preparation and electronic filing available to 70 percent of the taxpaying population, and together with the Volunteer Income Tax Assistance (VITA) program serve between 2.5 to 3 million needy taxpayers a year.

In recent years some have criticized these programs for low enrollment rates and encouraging deceptive business practices.  But a recent third-party report commissioned by the IRS shows that the Free File program (while in need of improvement) has saved taxpayers $1.6 billion and is responsible for 53 million free returns since 2002.  

One way working families can give themselves a “tax break” is to take advantage of the IRS Free File program or the Volunteer Income Tax Assistance program. The Free File program, public-private partnership between the IRS and the software industry, makes free online tax preparation and electronic filing available to 70 percent of the taxpaying population and currently serves 2.5 to 3 million taxpayers annually. The Volunteer Income Tax Assistance (VITA) program helps another 3 to 3.5 million taxpayers file every year.