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Wrapping Up 2020: Volunteer Income Tax Assistance During the Pandemic and Beyond

Posted on Dec. 21, 2020
Noah B. Metz
Noah B. Metz

Noah B. Metz is an attorney at Bowen Tax Law PC in Palo Alto, California, and a long-time participant in the volunteer income tax assistance (VITA) program. He thanks Ryan Coombs and Gezche Graves for their valuable insights.

In this article, Metz examines the VITA program and how it fared in 2020, explores lessons learned, and offers next steps to shepherd the program through the rest of the COVID-19 pandemic and beyond.

Copyright 2020 Noah B. Metz.
All rights reserved.

VITA, for the Uninitiated

The volunteer income tax assistance (VITA) program pairs volunteer tax return preparers with low-income tax return filers. In 2020 VITA was generally open to households earning $57,000 or less. In 2018 VITA volunteers prepared about 1.6 million tax returns — about 1 percent of all tax returns filed that year.1 While several programs permit low-income taxpayers to file their returns for free, VITA and the Tax Counseling for the Elderly Program (TCE)2 are largely the only options for those who lack the ability to use computer software (which can be free to low-income filers) or a pen, calculator, and green visor to do the tax returns themselves.3 The VITA program is a vital community service. It can save low-income families hundreds of dollars in tax preparation fees and in many cases can help them connect with other critical resources (such as opening low-cost checking and savings accounts and referrals to low-income taxpayer clinics). And of course, VITA enables taxpayers to file returns, and in some cases receive large refunds, which for some make up a meaningful part of their annual income.

Key to understanding VITA is that, like many IRS programs, it has a complex administrative history spanning decades. On one hand, the IRS sets forth a sea of ground rules that VITA sites must follow. All VITA sites must meet IRS requirements for privacy, quality control, and volunteer credentials and training. VITA volunteers must pass written IRS examinations on ethical, administrative, and tax topics to ensure that they have appropriate knowledge of the IRC to properly assist taxpayers with the preparation of their returns.4

Despite the IRS’s attempts to standardize VITA sites by way of these requirements, the sites vary greatly. This is due in part to the fact that the IRS does not operate VITA sites directly. Instead, various community organizations and nonprofits apply for IRS grants to operate VITA sites. A sponsor organization may operate just a few sites or hundreds. The IRS provides the sponsoring organization with limited administrative support, grant money, and periodic inspection. The sponsor organization recruits volunteers to run the site, trains volunteers, provides equipment like laptops and printers (often paid for with IRS grants), and oversees the day-to-day operations. All sites also generally use the same tax preparation software (TaxSlayer),5 which is provided by the IRS.

Some sites have veteran return preparers, superior administrative support, and hum with quiet efficiency. Others are understaffed, overwhelmed, and gush chaos and confusion. The sponsor organization, the individual volunteers, and the actual location where the returns are prepared (often a church or library) play an outsized role. In the “before times” (that is, before 2020), a typical VITA location would consist of a room with more than a dozen tables, each with at least one computer, one or two volunteer return preparers, and one or two clients — plus a few children and site coordinators milling around the room. This, of course, all changed in early March.

What Happened This Year

Given what a typical VITA site looks like, it should come as no surprise that about 95 percent of traditional (that is, in-person) VITA sites closed when the pandemic struck.6 As sites began to close in response to the pandemic, interest in ways to virtually prepare tax returns for VITA clients surged. The sponsor organization I volunteer with, United Way Bay Area (UWBA), has been experimenting with approaches to virtual tax return preparation for several years. This has been a growing trend among VITA site sponsors nationwide.

For example, in a “drop-off” model, clients have their tax forms scanned at a site, which may exist solely to field drop-offs or which may also prepare some returns the old-fashioned way — that is, entirely in person. A volunteer at the same (or sometimes a completely different) site then reviews the materials, calls the client to ask questions, and prepares the tax return. Another common practice, known as facilitated self-assistance (FSA), permits clients to come to a VITA site and prepare their tax return themselves using software provided by the site — with help as needed from a trained volunteer.

By chance, even before COVID-19, several sponsor organizations such as Code for America and UWBA were planning to pilot a new “all-virtual” model in 2020, in which clients would upload their documentation using a smartphone. Then, as in the drop-off model, a volunteer would review the documentation, call the client, and prepare the tax return.7 Thus, it just so happened that the infrastructure was in place immediately before the outbreak of the pandemic to, at least on a small scale, prepare tax returns remotely.

Based on feedback from clients, stakeholders, and my own personal experience, the results of the all-virtual pilot program were extremely encouraging. Many clients found the all-virtual model more convenient and efficient. During a normal year, most VITA clients spend several hours in transit, and then even more time waiting to get their tax returns completed.8 As a volunteer, I also found it quite efficient to prepare tax returns from home whenever I had time.

Based on my positive experience as a volunteer preparing all-virtual tax returns this filing season, I naively assumed that this model of return preparation saved the day. Indeed, at first glance, the numbers seem encouraging: Despite the pandemic, VITA and TCE sites together prepared about 2.5 million tax returns in 2020, down from about 3.5 million the year before.9 UWBA fared similarly: It sponsored more than 200 sites (consisting of VITA sites and TCE sites)10 and filed about 53,000 tax returns in 2020, down from about 81,000 in 2019.11 However, on further analysis, only about 800 of UWBA’s 53,000 filed tax returns were prepared using the all-virtual model.12 Thus, it seems that the all-virtual model may have been responsible for relatively few tax returns filed during the 2020 filing season.

There may be several reasons for this underperformance. First, because the all-virtual option was new and only intended to be a limited pilot program, many clients did not know it existed. Second, it was not intended to be scaled beyond a select number of VITA sites in 2020. Third, the all-virtual model requires moderate tech savviness and a smartphone, which not all VITA clients have, and was designed to be only one of many possible solutions. The first two of these problems may be improved upon in the upcoming filing season; the third is much more intractable and suggests that increasing support for virtualization alone will not solve the looming problems facing the VITA population in 2021.

For those looking for a final reason to worry, consider that of the approximately 2.5 million returns prepared by VITA and TCE in 2020, about 1 million were prepared in the first three weeks of February — before the stringent pandemic restrictions that closed VITA sites were imposed.13 The remaining 1.5 million were prepared over the next several months. February is typically very busy at VITA sites because clients rush to get their tax refunds as early as possible. In 2021 many VITA sites may not be open in February, which could further depress the number of tax returns that can be prepared by conventional means.

What Comes Next

Not all states imposed COVID-19 prevention measures as restrictive as those in California during the 2020 filing season, and what February through April of 2021 will bring throughout the country is anyone’s guess. However, for areas where COVID-19 preventative measures prohibit or meaningfully limit traditional VITA sites during the 2021 filing season, major changes must be made to the VITA model to continue to serve VITA clients. The rest of this article addresses what the IRS, Congress, VITA sites (and their sponsors), and we as tax practitioners can do in 2021 and beyond to address this looming challenge.

What the IRS Can Do

The pandemic has thrown many challenges at the IRS that require tailored responses, adaptiveness, and leadership. Different parts of the country will face different challenges. In 2021 some places will struggle with increasing infections, and some parts of the country will be in varying states of lockdown. Areas with high COVID-19 infection rates will not necessarily be locked down, and the rules governing the lockdowns will likely change over time. Thus, different VITA sites will require different levels of assistance from the IRS, and those needs may change rapidly throughout the course of the 2021 filing season. In anticipation of this possibility, the IRS should use the next few months to assemble a framework of the potential conditions it expects VITA sites to face (ranging from no COVID-19 restrictions to restrictions that entirely prevent traditional VITA sites from operating) and how the IRS can assist.

This framework would enable the IRS to be proactive and anticipate the needs of VITA sites. For example, if a VITA site needs to pivot to a more virtual model, the IRS could supply a training module to help inform volunteer preparers how to comply with administrative rules that become more difficult to maintain in a virtual model (like getting client signatures). VITA sites may need more funding to quickly deploy additional technology and protective equipment or to advertise changes (for sites that have reopened or are deploying virtual options). The IRS should also develop a revised grant procedure to rapidly get cash in the hands of VITA sites.14 As all-virtual and drop-off tax return preparation becomes increasingly popular, the IRS should also be spending its holiday season thinking about what it can do to ease compliance burdens with any possible administrative rules (which were generally written with in-person VITA preparation in mind). Through all of this, the IRS should also consider how VITA sites can continue to reach the most vulnerable slices of the VITA population (notably those with disabilities).

The IRS may also need to rethink how it provides information (like forms W-2 and 1099) to taxpayers that the IRS separately receives from third parties. Several sources interviewed for this article have predicted that 2021 may be a year in which many taxpayers struggle to obtain these tax documents, which are necessary to prepare a tax return. The IRS should consider whether it can streamline the process of delivering such documents (which are sometimes given from employer to employee in person or are lost in the mail when people move). The IRS does have an online “Get Transcript” feature that allows taxpayers to retrieve that information online, but it can be difficult to access. The “Get Transcript” function was recently revamped in response to identity theft concerns, and, as a result, its identity verification questions can at times be too difficult for taxpayers to answer.15 Further, when the taxpayer fails to get online access, the only other option is to receive the information at the mailing address for the prior-year tax return. This is problematic for those who move frequently or are homeless.16 The IRS should consider setting up a hotline to assist those who are unable to use the “Get Transcript” tool.

The IRS and Treasury can also try to learn from the difficult (and necessarily rushed) rollout of the $1,200 taxpayer “not a stimulus” stimulus checks,17 properly named economic impact payments (EIPs). Guidance on a range of topics for receiving the EIP was unclear for weeks or months. Serving the VITA population includes developing rapid and clear guidance and procedures to claim stimulus money. The IRS and Treasury should leverage their experience with the EIP program and draft (but not release)18 guidance and FAQs for future stimulus programs. These efforts should focus on more robust processes to allow taxpayers to communicate with the IRS and claim stimulus funds more easily, including ways to provide a new mailing address or checking account information for direct deposit. These types of issues are likely to be inherent in any stimulus program that the IRS administers, and so should prove useful regardless of what type of stimulus program Congress ultimately approves.19 While the IRS must play the hand it is dealt from Congress, anything it can do next time to provide prompt and clear guidance — ideally requiring as little input from taxpayers as possible — will be of great service.

Finally, Treasury should consider another extension of the due date for filing returns and paying taxes. While this is not free of cost to the government, by stretching out the filing season, there would be a greater chance for taxpayers to find an open VITA site, and it would decompress demands on virtual tax preparation by spreading out when clients reach out for help.

Beyond these specific administrative points, Stakeholder Partnerships, Education and Communication (SPEC) (the IRS office that oversees the VITA program) should reflect more fundamentally on its role in the VITA program. SPEC should view itself not as a junior partner to VITA sites (or even as a cheerleader), but as a leader of a vital program. There are countless VITA sites throughout the country that experimented with innovative solutions to see what worked during 2020. This autonomy and innovation is important and lets individual sites cater to the specific needs of their individual communities. However, major technological changes like rolling out virtual tax return preparation should be spearheaded by SPEC. Consider for comparison the tax return preparation software that VITA sites use. Each individual site did not form a steering committee, try several software packages, and buy what it liked; SPEC took charge, solicited bids for the entire program from vendors, and ultimately bought a license from TaxSlayer for all its sites. Thus, the difficult task of deciding which software to use was shouldered by SPEC and a single vendor now develops expertise working with a wealth of sites. In addition to creating uniformity across sites (and making it easier for volunteers to go from one site to another), it saves individual sites a lot of time and money. Certainly at the site level, local factors still matter. Individual sites decide how to deploy the technology: Some use it on desktop computers, some on laptops, some from home, and some from a central site. This is how SPEC should be thinking about the further virtualization of tax return preparation.

SPEC has been taking steps to rise to the tremendous challenge. It has held stakeholder meetings to solicit input and shared stories from VITA sites about what approaches have worked well. It plans to release a short summary of the different kinds of virtualization for VITA sites that have not yet fully embraced the trend.20 It has focused on protecting taxpayer data and issues of identity theft that have become areas of greater concern with tax returns increasingly prepared remotely. SPEC has been coordinating with Code for America, the group behind the all-virtual model that was rolled out in 2020 — a partnership that will be critical for a smooth rollout as the all-virtual model grows in popularity.

All this is a valuable start, but much work remains undone. SPEC’s general approach seems to be letting individual VITA sites drive much of the rollout of tax return virtualization, rather than leading the charge. For example, rather than putting together a high-level summary of virtualization approaches, SPEC should be assembling in-depth descriptions of best practices, developed in collaboration with VITA sites that have been successful. SPEC should also offer training materials and online recorded trainings specifically on how to do virtual tax return preparation, instead of relying solely on nonprofit partners to prepare those materials and train the individual volunteers. Finally, other than its focus on taxpayer information security and identity theft (which are important), it is not clear that SPEC has made much progress in alleviating any administrative hassles that crop up in preparing virtual tax returns (such as obtaining client signatures).

SPEC has been fortunate to find a partner in Code for America, and it should continue to develop that relationship to develop tools for VITA sites for both all-virtual and drop-off tax return preparation. A representative from Code for America said the tool should be ready for all VITA sites that want to use it in 2021, and that the main barriers to adoption are adequate awareness of it in the VITA community and adequate volunteer training. This may largely address the second problem highlighted earlier — the inability of the pilot program to be scaled across VITA sites in 2020. The IRS can help increase awareness and uptake of the all-virtual method (addressing the first problem highlighted above) by pressing Congress to give it money to provide special advertising grants to VITA sites for promotion of virtual tax return preparation and for development of what it views as best practices, training materials, and training sessions for interested volunteers.

What Congress Can Do

Congress should take specific steps immediately to assist in the 2021 filing season, but it should also seriously consider broader reforms. In the short term, Congress should provide special funding to Treasury to enable it to offer targeted grants to VITA sites to deal with the challenges ahead. This would provide VITA sites with a one-off infusion of cash necessary to buy any additional technology (such as to scan tax documents and build out remote tax preparation capabilities), conduct any training, and buy licenses for relevant software (such as software to internally streamline preparation of many tax returns among volunteers, to securely store client information, or to facilitate gathering electronic signatures). This grant process should be as expedited as possible and should be available throughout the filing season as the needs of VITA sites evolve. Unlike traditional grants for VITA sites, these grants should not be required to be matched (or the match should not be required to be 50-50).

Congress should also pass tax reform to the earned income tax credit to permit certain taxpayers to receive the EITC in 2021 even if their earned income decreased in 2020. The House passed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800) on May 15 (and the Senate has, as of the date of this publication, failed to pass any similar bill), which would broaden the scope of the EITC in several ways, among them to permit taxpayers to elect to compute their EITC by using their 2019 earned income instead of their 2020 earned income.21 Congress has done this before in some limited disaster areas,22 but never nationwide. The HEROES Act omits protections that would guard against some distortions (such as if a taxpayer had a change in household composition from 2019 to 2020), which — shameless plug — I discuss in a prior Tax Notes article.23 The Senate should pick up at least the EITC portions of the HEROES Act and promptly pass it. It would also be worth considering making this particular change to the EITC permanent (or at least applicable for a few more years).

More generally, if Congress is willing to make meaningful changes to the EITC, it may be time to significantly simplify it. Many taxpayers in need fail to claim the EITC despite being eligible.24 Because the EITC is the single largest antipoverty tool in the tax code, its sound administration bears heavily on issues of fairness and equity. Suggestions for how to fundamentally improve the EITC abound, but a good place to start is with the proposal put forth by Nina Olson, the former national taxpayer advocate, who proposes to essentially replace the EITC with a per-worker credit based on earned income and a universal per-child benefit.25 While some may advise not to be too hasty in a time of such upheaval, the EITC and its problems have lingered for decades, and it is time to be bold and take on the challenge of EITC reform.

Finally, the pandemic has made all too clear the tremendous value that an automatic filing regime would bring to this country. Our method of having each American spend incredible amounts of time preparing annual tax returns is truly unique. It is ultimately regressive and tragically costly to the poorest taxpayers. In many cases, the IRS has all the information it needs to prepare a tax return (such as a single W-2 and a few 1099s, which are sent to both the taxpayer and the agency). It is not difficult to imagine the IRS preparing a draft tax return for most Americans and then allowing them to either sign it and be done, or prepare their own return if they disagree.26 Of course, tax return preparation companies shudder at the thought, and have fought tirelessly to prevent the IRS from facilitating widespread free tax preparation.27 As part of a sort of détente reached between the IRS and the tax return preparation companies, in 2002 the IRS and a consortium of those companies entered into an agreement28 whereby the companies would directly provide low-income taxpayers with free online tax return preparation.29 But in many cases those taxpayers have been misled into using paid versions of those services (despite qualifying for the free tax preparation services),30 something about which Congress has done little.31 The tax return preparation companies seem to have even taken active steps to hide their truly free services and direct consumers to the paid portions of their sites,32 something that the Federal Trade Commission may be investigating.33 If Congress is unprepared to take bold action to move toward an automatic filing regime, it should at least crack down on the shenanigans of tax return preparation companies vis-à-vis the Free File program and force them to automatically provide services for free to all eligible individuals who land on any of their websites — rather than only to those who jump through the correct digital hoops to do so.

What VITA Sites Can Do

There are no easy answers, and each site will likely find a slightly different solution in 2021. Flexibility will be the byword. Areas may open, lock down, and oscillate in between. In those areas that can have any indoor tax assistance, service may be slower than usual, more physically spaced out, and less accommodating of clients bringing children along (a common occurrence). Clients with special needs will likely be underserved (and sites should anticipate and work hard to address this). To serve the number of clients who need assistance, sites may need to supplement walk-in service (which in some areas may be prohibited at times) with a variety of ways to prepare tax returns remotely. In particular, locations that are at least partially open may benefit from significantly broadening the use of FSA tax preparation, in which clients use software at VITA sites themselves, but with guidance from trained volunteers. This is the equivalent of using self-checkout at the grocery store: fewer volunteers can serve more clients, and generally from a greater physical distance.

The main two models for remote tax return preparation seem to be the drop-off model and the all-virtual model, although I am hopeful that innovation in the VITA ecosystem will continue and produce other complementary and alternative solutions in the near term. There have been stories of VITA volunteers working out of their garages, doing intake over the phone to minimize contact, and even of operating a VITA site out of a bank using a teller window to minimize physical contact. Perhaps sites will have pop-up locations that allow clients to drop off their materials (to scan and upload the documents), to be later prepared by volunteers from home. Sites can experiment with preparing tax returns in parks (when the weather and internet access permit). Perhaps FSA tax preparation could occur entirely over the phone, using screen sharing software. Admittedly, all these experiments will require significant advertising budgets, volunteer training, capital expenditures, and time to reach potential VITA clients, and so there may be limited value to any services that do not recur for at least several weeks (if not the full tax season), to allow word to get around.

What Practitioners Can Do

If you have made it this far in the article, you probably know that this is the time for the pitch. We, as tax practitioners, are in a unique position to help at VITA sites. Many sites are run entirely by volunteers who have no tax background; the presence of even one experienced tax practitioner can be a boon to a site and a great opportunity for all the volunteers to raise their tax game. For those practitioners who focus on other areas of tax, volunteering with VITA is a great way to improve familiarity with the sections of the code that pertain solely to individuals.

It isn’t simply a matter of “someone else will do it.” When sites are busy and understaffed, clients get turned away or wait times become a deterrent. Sometimes clients come back, and sometimes they do not. When they do not, they generally either go to a paid preparer (which the client often cannot easily afford) or simply do not file, in some cases losing the benefit of tax credits worth thousands of dollars. This is, incidentally, the goal of Code for America’s foray into the tax system: to eliminate the gap between those who are eligible for the EITC and those who actually claim it. However, their valuable work is ultimately just a way to match return preparers with clients; tax practitioners are needed to step into the gap. Volunteering for the first time can be a bit intimidating, but depending on one’s familiarity with the sections of the code that pertain solely to individuals, a new volunteer can pass the relevant IRS certification exams to be up and running as a certified return preparer at a local site in short order. For those concerned about malpractice issues, the Volunteer Protection Act addresses malpractice committed while volunteering.34 Many law firms offer pro bono hours, and continuing education credits are also available in some cases.

Even for those who do not volunteer, an easy way to help low-income taxpayers is to inform them of and guide them to the appropriate resources. Many low-income taxpayers are completely unaware of the VITA and TCE programs, and sharing a list of nearby sites can be very helpful to them.35 As previously mentioned, many tax return preparation companies’ websites often claim to be free but are not. A good site with the correct links to the actually free tax return preparation websites is www.turbotaxsucksass.com.36 For those looking for a slightly more professional (albeit less memorable) website to pass on to others, www.myfreetaxes.com also works.37 Most low-income taxpayers (with income under $72,000 in the upcoming filing season) with relatively straightforward tax returns can complete their tax returns for free using either of those websites. Other taxpayers need help with actual tax controversies. In those cases (such as when a taxpayer receives a concerning letter from the IRS), taxpayers can be greatly aided if informed that they may be eligible for help from a nearby low-income taxpayer clinic.38

FOOTNOTES

2 TCE is a companion program to VITA that focuses on elderly tax return filers. TCE prepared a similar number of tax returns in 2018. This article will focus on the VITA program, although many of the findings here apply equally to TCE.

3 Visors off to the approximately 7 million filers who prepared their tax returns by hand in 2018. I had thought my father-in-law was the only one still doing that.

4 IRS Publication 5166, “IRS Volunteer Quality Site Requirements,” 5 (Oct. 2018); IRS Publication 5101, “Intake/Interview & Quality Review Training, 2019 Filing Season” (Oct. 2018); IRS Publication 4961, “VITA/TCE Volunteer Standards of Conduct – Ethics Training, 2018 Returns” (Oct. 2018).

5 Which, but for copyright violation concerns, would be a great name for a heavy metal band of CPAs.

6 Interview on December 9, 2020, with Frank Nolden, director of the IRS Stakeholder Partnerships, Education and Communication (SPEC) office, which oversees the VITA program. Nolden noted that in part this very high closure rate may be because many VITA volunteers are elderly retirees, and thus are particularly susceptible to COVID-19.

7 In this article, I use “virtualization” to mean any number of approaches to prepare tax returns that are not “old-fashioned” in-person methods. However, by the “all-virtual” model, I mean specifically the method of preparing a tax return completely remotely (generally from home) for both the client and volunteer.

8 In my experience, a total of one hour to complete the process is great, two hours is typical, and three hours is not unheard of on a busy day.

9 Interview with Nolden, supra note 6.

10 The TCE sites were sponsored in partnership with the American Association of Retired Persons.

11 Interview on November 17, 2020, with Gezche Graves, senior program manager at Earn It, Keep It, Save It, the UWBA program that runs its VITA sites.

12 Id. Nolden at SPEC was unable to provide a breakdown of the national numbers using the all-virtual model at the time of publication.

13 Interview with Nolden, supra note 6.

14 In large part this would require action from Congress, as the money set aside for VITA grants for the year has already been allocated. However, if Congress does come up with the cash, the onus will be on the IRS to greatly streamline the grant process so the money has use in 2021.

15 Although merely anecdotal, I have had several VITA clients report difficulty accessing the “Get Transcript” function.

16 The current solution that the IRS offers is for these taxpayers to complete a change of address form (Form 8822), wait a month or more, and then request that the transcript be mailed to their new address on Form 4506-T.

17 Senate Majority Leader Mitch McConnell, R-Ky., stoically described the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136) signed into law on March 27, 2020, as “emergency relief” and not a “stimulus” measure. The $1,200-per-taxpayer (and $500-per-child) payments were called economic impact payments. See Alexander Bolton, “McConnell Says $2T Bill Is ‘Emergency Relief’ and Not a ‘Stimulus,’The Hill, Mar. 25, 2020.

18 At the time of publication, while the Senate appears to be seriously considering passing additional stimulus in the mold of the EIPs, no consensus has emerged and no bill has been passed in the Senate.

19 Congress did not make the EIP easy for everyone to claim. Checks were automatically mailed to those who had filed a tax return for tax years 2018 or 2019, but many of those who had not (including those with no legal obligation to do so) had to take affirmative action to receive their payments. The IRS set up a way for these nonfilers to file a short claim online to receive their check. However, one notable difficulty was that many people completed the nonfiler form and then later electronically filed a tax return, but had it rejected because they had told the IRS they were nonfilers. This forced taxpayers to use paper returns instead of electronic filing, further delaying tax refunds.

20 Interview with Nolden, supra note 6.

21 Section 20126 of the HEROES Act.

23 See Noah B. Metz, “The Earned Income Tax Credit ‘Ratchet,’Tax Notes, Nov. 6, 2017, p. 801 (section on “Changes in Taxpayer Household Makeup”).

24 As of tax year 2016, the latest year for which data exists, the EITC participation rate was estimated to be approximately 78 percent nationwide. See IRS, “EITC Participation Rate by States.”

25 See National Taxpayer Advocate 2020 Objectives Report to Congress, Vol. 3. This report makes up a special report just on the EITC and contains a thorough literature review.

26 California briefly experimented with such a system, and it piloted a “ReadyReturn” with about 50,000 taxpayers for the 2004 tax year. Even though the system was extremely popular, it failed to survive a vote in the legislature, in part because of intense lobbying by Intuit Inc., maker of TurboTax. See, e.g., Liz Day, “How the Maker of TurboTax Fought Free, Simple Tax Filing,” ProPublica, Mar. 26, 2013. For a great podcast about this saga, see Alex Mayyasi and Stacey Vanek Smith, “Planet Money, Episode 760,” NPR, Apr. 3, 2019.

27 No legal barrier now prevents the IRS from bringing such a system into existence, but the undertaking would surely require significant funding and direction from Congress. In a version of the Taxpayer First Act (which ultimately passed without this provision), a provision would have made it illegal for the IRS to do this. See section 1102 of the Taxpayer First Act, as passed by the House Ways and Means Committee on April 2, 2019.

28 That agreement was published in the Federal Register (vol. 67, no. 153, p. 51621) on August 8, 2002, and was executed on October 30, 2002. The agreement with the IRS is updated from time to time. For the most recent, see IRS, “Eighth Memorandum of Understanding on Service Standards and Disputes Between the IRS and Free File Inc.

29 This is now known as the Free File program. It is a partnership between the IRS and the Free File Alliance (a group that represents the major tax return preparation firms), through which low-income taxpayers (for the upcoming filing season, those earning $72,000 or less) can use private software like H&R Block or TurboTax to file their tax returns for free.

30 For example, in 2019 Los Angeles’s city attorney sued H&R Block and Intuit, maker of TurboTax, on the basis that the companies had been “actively undermining public access to the IRS’s ‘Free File’ program, while simultaneously employing deceptive and misleading advertising and design schemes intended to induce taxpayers” to buy expensive TurboTax and H&R Block products. These tactics included confusing naming (e.g., TurboTax’s “Free Edition” actually charges for state tax returns, while its “Freedom Edition” (which is truly free for eligible filers for state and federal tax returns) is not listed on the site’s homepage).

31 While Congress has passed no laws to address these alleged abuses (other than those that further entrench the position of private tax return companies, such as in the draft Taxpayer First Act prepared by the Ways and Means Committee last year), some senators have used their bully pulpit to express their misgivings. Sens. Ron Wyden, D-Ore., and Chuck Grassley, R-Iowa, voiced their concern to IRS Commissioner Charles Rettig in a letter on May 6, 2019. Sen. Elizabeth Warren, D-Mass., introduced a bill in 2017 (the Tax Filing Simplification Act of 2017) that would have ordered the IRS to create its own online tax preparation service and ban the agency from working with private companies for the task. Sen. Jeanne Shaheen, D-N.H., put forth a similar bill (the Simpler Tax Filing Act of 2017), as did legislator Bill Foster, D-Ill. (the Autofill Act of 2017).

32 ProPublica reported in 2019 that Intuit had actively demoted its truly free software in Google and other search algorithms. See Justin Elliott, “TurboTax Deliberately Hid Its Free File Page From Search EnginesProPublica, Apr. 26, 2019. In documents later obtained by ProPublica, an investigation on June 9, 2020, by the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations later verified these findings. See Permanent Subcommittee on Investigations, “PSI Staff Memorandum” (June 9, 2020). An investigation by the New York State Department of Financial Services released on July 15, 2020, reached similar findings. See New York State Department of Financial Services, “Report on Investigation of Free Tax Preparation and Filing Services” (July 2020).

33 Reporting on September 8, 2020, by ProPublica also indicates that the FTC has been investigating Intuit over these matters for at least a year. See Elliott, “The FTC Is Investigating Intuit Over TurboTax Practices,” ProPublica, Sept. 8, 2020.

34 See 42 U.S.C. chapter 139.

35 Note that while the IRS does maintain a list of those sites, it is not always current, so sometimes an internet search can provide a more current and comprehensive list of sites.

36 In addition to being rather curious at how often that phrase is used in this august publication, I note that this site was produced by Hasan Minhaj, the host of a short-lived Netflix weekly news show called Patriot Act, which has an excellent episode on this topic.

37 This website is a result of a partnership between the United Way and H&R Block.

38 The national taxpayer advocate’s website is a good resource for finding these sites.

END FOOTNOTES

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