IRS Misled Taxpayers About Free Filing Tool, Watchdog Report Says

U.S. Internal Revenue Service building in Washington, D.C. May 14, 2013. Photo by Diego M. Radzinschi/ALM

For example, the Taxpayer Experience Survey “did not provide a ‘neutral’ option for participants,” according to the report.

“Research shows that developing a survey with a five-point scale, to include a neutral option, rather than a four-point scale as used by the Taxpayer Experience Survey, is preferable because it does not put taxpayers into a ‘forced choice’ response scenario,” according to the report.

Further, the IRS survey prompt “may have led taxpayers to believe that the tool would have more options than it will immediately have available, such as the ability to file state tax returns.”

The report further states that “an independent study by a Federally Funded Research and Development Center found that 60% of taxpayers would choose their current software when state tax returns are excluded from an IRS Direct File tool.”

The decision was made to proceed with a Direct File pilot based on a 72% interest in a Direct File tool, per the Taxpayer Experience Survey.

However, according to the report, only 28% were “very interested” compared with 45% who were “somewhat interested.”

Further, the IRS “could not provide TIGTA with any supporting documentation to support its cost estimates or how it determined there would be at least 5 million users,” according to the report.

As a result, TIGTA says it “had no way to identify the reasonableness of the IRS’s cost estimates.”

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