Most Americans could file their taxes for free, but don’t

A new government watchdog report finds that while most Americans are eligible to file their taxes for free, only a fraction use the services provided through the government.

Instead, many taxpayers utilized other methods, “which they may have paid to use,” according to a new U.S. Government Accountability Office study on the 2020 tax filing season.

The GAO report, issued Thursday, found that while 70% of taxpayers were eligible for the Internal Revenue Service’s free-filing program, only 3% of taxpayers actually use the service.

IRS’ free file program consists of a public-private partnership of tax software companies that offers free services to tax payers outside of the IRS website.

Taxpayers whose incomes are below a certain threshold can use the free file program—which this season accounts for any person or family with an adjusted gross income of $73,000 or less in 2021.

One suggested recommendation on how to improve taxpayer usage of free tax services—that the IRS consider developing a new public option, was rejected by the agency due to the IRS’ funding concerns.

“If new legislation and funding were approved, then the IRS would expect to assess the feasibility and utility of offering additional tax preparation and filing options,” wrote Douglas W. O’Donnell, deputy commissioner for services and enforcement in an April 11 letter to the GAO.

The agency is battling a backlog of millions of tax returns, and struggles to modernize its computer systems.

And while the agency’s workforce is the same size it was in 1970, IRS this year is facing its biggest backlog in history. At the end of the 2021 filing season, the agency had 35.3 million returns waiting for processing.

The GAO report finds that the “IRS may be understating its potential to improve certain aspects of the taxpayer experience,” and that it would “not necessarily need to develop new filing options on its own.”

Though the agency announced plans in March to hire at least 10,000 more workers to help process returns, administration officials say the IRS is in desperate need of more funding, as its budget has fallen over the last decade.