Free File Software May Not Always be Accurate

By David & Mary Mellem, EAs

The Treasury Inspector General for Tax Administration (TIGTA) released a 45 page (pdf version) report dated June 28, 2007 dealing with the Free File Program. There is also a one page “Highlights” of the report.

One of the TIGTA concerns was the accuracy of the returns prepared using the Free File Program’s Alliance members’ programs. TITGA staff ran four common scenario returns through the programs and noted the following:

  • —25% of members would not allow the taxpayer to take either the Earned Income Tax Credit or the Child and Dependent Care Credit without also taking the dependency exemption.
  • —One software allowed a dependency exemption that should not have been allowed. (No additional details were given on this.)
  • —Software for 45% of the members did not have adequate interview questions to determine if the taxpayer could take the dependency exemption..

TIGTA states “taxpayers must be able to rely upon the accuracy and thoroughness of the software they use to calculate their returns.” IRS was notified of the errors and informed the affected Alliance members of such. TIGTA followed up on the scenarios in February and found the errors not yet corrected.

IRS conducts two different tests on the software programs, but they are mainly testing to make sure the software operates with the parameters of the Free File Agreement. The tests are not intended to review for technical accuracy. The Free File Program agreement requires Alliance members to guarantee the calculations performed by their software packages.

TIGTA recommended IRS conduct tests on the software it selects before the software is used by IRS employees and volunteers to prepare tax returns. IRS responded that “it would not be feasible to perform additional testing on the tax return preparation software without impeding the availability of the software products for its employees and volunteers and delaying the processing of tax returns.”

Report 2007-40-105 can be found at

    [TaxMama note: I am not sure why it would be so hard to test these programs capabilities quickly? I used to test complex business returns for the major states for one of the biggest tax software producers – CCH Computax. (Back in the days when the BIG CPA firms and smaller tax firms all send their tax returns out to be processed.)

    All you need to do is create one set of information for a typical Free File profile. (Remember, these are low income folks with wages and children – not much in the way of investments.) Carefully prepare the tax return by hand for that one profile. Then run the profile data through all the programs. Any that don’t all come up with the same result you got by hand – Someone’s done it wrong. Right? ]

Upcoming seminars listed at end of this email.

This text has been shared with you courtesy of: David
& Mary Mellem, EAs & Ashwaubenon Tax Professionals,

920-496-1065 (fax 920-496-9111),,, and

©2007 Ashwaubenon Tax Professionals. No reproduction of this article is permitted without the express consent of Ashwaubenon Tax Professionals, 2140 Holmgren Way, Suite 1040, Green Bay, WI 54304.

If someone else would like to be added to our list, have them send us an email.


July & August ­ NCPE ­ Partnership and Corporation program, North Chicago, Schererville, Ft Myers, Greensboro, Cincinnati, Durango, Denver, Grand Junction, Pittsburg, Providence, and Saddlebrook. For more details go to

David L. Mellem, EA
Ashwaubenon Tax Professionals
2140 Holmgren Way
Green Bay, WI 54304
920-496-1065 – – fax 920-496-9111

Tax consultation, seminar speaking, ghost writing, general tax preparation & planning assistance


IRS CIRCULAR 230 Disclosure: Under U.S. Treasury Department regulations, we are required to inform you that, unless expressly indicated, any tax advice contained in this email, or any attachment hereto, is not intended or written, to be used, and may not be used to (a) avoid penalties imposed under the Internal Revenue Code (or applicable state or local tax law provisions) or (b) promote, market, or recommend to another party any tax-related matters addressed herein.