- Lawmakers call on two federal agencies to investigate tax software giants for allegedly steering customers away from free government-sponsored tax preparation options.
- Democratic presidential contenders Bernie Sanders, Elizabeth Warren, Cory Booker and Tim Ryan are among the lawmakers who signed the letters, which were sent to the IRS and the Federal Trade Commission.
- Recent reports claim that tax preparation companies H&R Bloock and TurboTax creator Intuit have been allegedly adding code to tell Google not to list the free versions of their online tax preparation tools.
Lawmakers, including Democratic presidential contenders Sens. Elizabeth Warren and Bernie Sanders, are calling on the IRS and the Federal Trade Commission to investigate tax software giants for allegedly steering customers away from free government-sponsored tax preparation options.
"These companies' actions in hiding Free File [Alliance] from search engine results — and therefore from consumers — in order to artificially inflate profits and deprive low-income consumers of cheaper product merit investigation as unfair and deceptive practices," the group said in one of the letters, which were dated for Thursday and released Friday.
The group of legislators also called on the IRS to terminate agreements with these companies and refund taxpayers who were who were eligible for free services, "but were unable to find it."
Under the Free File Alliance — an agreement between the IRS, major tax preparation companies and states — Americans who make an adjusted gross income of $66,000 a year or less are eligible to prepare their tax returns at no cost. The 16-year-old partnership among private software companies was in exchange for the IRS promising not to create its own free online service.
Recent reports claimed that tax preparation companies H&R Block and Intuit — the maker of TurboTax — have been allegedly adding code to tell Google and other search engines not to list the free versions of their online tax preparation tools.
In doing so, the companies are supposedly trying to direct customers toward paid products and away from free options they might be eligible for. The allegations were originally reported by ProPublica.
The revelations prompted several Democratic lawmakers — including Sen. Cory Booker and Rep. Tim Ryan, who are also running for president — to demand the FTC and the IRS to take action.
Neither Intuit nor H&R Block immediately responded to CNBC's request for comment.
The push comes several days after New York Gov. Andrew Cuomo, a Democrat, called on two state agencies to conduct similar investigations concerning the same issues.
However, federal lawmakers took their call further, saying the alleged violations are more widespread throughout tax preparation companies. Lawmakers claimed that TaxSlayer, FreeTaxUSA, and 1040.com are also deliberately hiding their free tax software products, using similar methods as Intuit and H&R Block, after conducting their own review.
TaxSlayer, FreeTaxUSA and 1040.com also did not immediately respond to requests for comment.
In recent weeks, a group of Democratic lawmakers, which also includes the four presidential candidates who signed this week's letters, has reintroduced legislation in the House and Senate to instruct the IRS to create its own free online tax preparation service. It would essentially eradicate the Free File Alliance and bar the IRS from entering agreements with private software companies.
Similar legislation has been proposed in past years, but the issue is likely to receive greater attention taken due to the controversy surrounding recent reports.
However, the Senate is simultaneously considering a bipartisan bill, the Taxpayer First Act, which would make the IRS and the Free File Alliance permanent. Tax software giants have been long lobbying for control of the bill's language.
Democrats hold the majority in the House, while Republicans have a 53-47 edge in the Senate.