It’s tax season, and many households are preparing to file their income tax returns. But data on the preparation services taxpayers use, whether they pay to file, and if so, how much, is not systematically collected.  

That information gap creates three problems. First, it makes it harder to assess if and how different preparation and filing methods affect return accuracy and audit rates. Second, policymakers can’t easily determine the extent to which preparation fees reduce the value of tax benefits delivered through the tax code. Third, there’s little way of knowing whether some communities are more likely to pay to file than others. Together, these issues limit policymakers’ ability to design and evaluate filing options that minimize unnecessary costs and burdens while ensuring taxpayers are complying with tax law.

Congress could solve these problems. It could require standardized reporting on filing methods and cost of preparing tax returns, including commercial software-prepared returns, with software companies auto-filling fields for the types of services provided and amounts charged.  

Known: Most households pay to file individual returns

Per the IRS, it processed about 161 million individual income tax returns in fiscal year (FY) 2024 (IRS Table 3). The vast majority of those returns (about 150 million or 93 percent) were prepared and filed electronically (IRS Table 4). Some paper filed returns may also have been prepared electronically using commercial software and then printed and mailed to the IRS. 

Below, Table 1 summarizes this data. It shows that most individual income tax returns are filed electronically and that paid practitioners prepare and file a large share of those e-filed returns.

• Of returns filed electronically, more than half (85 million) were prepared and filed for a fee by a paid practitioner (like the tax preparation shop in town, or the accountant or attorney who receives and reviews a taxpayer’s receipts and documents). Paid practitioners sign Form 1040, giving the IRS a useful data collection point.
• About 3 million tax returns were filed on IRS.gov through the IRS Free File Program, which provides free preparation and filing, in partnership with commercial software companies, to those with low and moderate incomes  (income under $89,000 for 2025 returns, although some providers may have additional eligibility requirements).
• About 140,000 returns were filed under the IRS Direct File pilot in FY2024. With Direct File, the IRS developed its own website so taxpayers could prepare and file their federal income tax returns directly with the agency for free. While our prior research indicates that most tax filers expressed interest in using Direct File,  the program has been eliminated and is not available for the 2026 tax filing season.
• An additional 3 million returns were prepared in-person at Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites.
• For about 8 million paper-filed returns, there is no data on how many paid or were prepared at no cost.

Perhaps most notably, for the remaining 61.7 million returns self-prepared with commercial software outside of Free File, the second largest group of returns after those prepared by a paid practitioner, there is no administrative data on how many of those filers paid or were prepared and filed at no cost.

Unknown: Excluding Free File, how many households file with free commercial software

Several commercial software companies advertise free tax preparation and filing options, outside of the IRS Free File program. The two largest players in the tax preparation industry, TurboTax and H&R Block, left Free File a few years ago but still advertise free filing options. Some taxpayers will begin to prepare their federal return for free with these options, but along the way, when shown various upgrades or ancillary products like expert help or the option to maximize tax breaks, may end up choosing a paid option.  

The American Coalition for Taxpayer Rights reported in 2023 that about 26 million federal returns were prepared and filed with commercial software for free, outside of the IRS Free File Program. 

But reports suggest that the number of households using free software outside of Free File has declined from these levels. On an earnings call in 2025, Intuit, the largest provider of commercial tax preparation software (TurboTax), reported 8 million returns prepared for free using their product. This was down from 10 million in the previous year and less than the approximately 13 million they had forecast in 2022 (40 million over three years). Data from H&R Block suggests they prepared about 3 million tax returns for free using their online products in 2025. Providing free software may not be a priority for companies, given the profitability of paid upgrades and “higher-priced and additional service offerings.”  

Other smaller companies (Cash App, TaxSlayer, or FreeTaxUSA) also provide free or low-cost tax filing software, but there is less published information about how many non-Free File returns they prepare at no cost and it’s unclear whether they are filling the gap left by companies like Intuit. 

Congress could fix this data gap 

Congress could require all returns to include information on how they were prepared (similar to what  paid practitioners currently provide), including whether they were prepared with commercial software. Lawmakers could also require all preparers to provide information on the amount taxpayers paid for preparation and filing services. That could include fees that are taken out of tax refunds using refund anticipation products or fees for add-on services, like having an expert review your return. To minimize administrative burden on taxpayers, Congress could direct commercial software companies and paid practitioners to auto-populate this information. Policymakers and the public would then gain a clearer understanding of how Americans prepare and file their tax returns, a civic duty many households are legally required to undertake. 

Researchers and policymakers could use the data to examine the link between tax preparation methods and fees and errors on returns, including among those who claim the earned income tax credit (EITC). This could inform if there is a need for more regulation and oversight of commercial software, which receives only minimal oversight from the IRS, according to the National Taxpayer Advocate.

To its credit, the IRS attempts to answer some of these questions. For example, it conducts taxpayer surveys to determine not just how much one pays but also how much time one spends filing a return. But such surveys typically gauge the burden each tax form places on taxpayers. They are not designed to learn how and why people file their taxes using a particular method or assess the impacts of those methods on compliance, audits, and refund amounts.

Households face an increasingly complex tax code with fewer options to navigate this system for free. Better data would give policymakers the tools they need to evaluate tradeoffs and design tax filing options that are fairer, cheaper, and easier for all taxpayers.