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I have seen that almost all of the tax preparation companies/softwares like H&R Block, Jackson Hewitt, Liberty Tax Service, TurboTax etc offer free basic federal tax filing.

Is there any law that makes it mandatory for the tax preparation companies to offer free basic service like there is some law making free credit reports once every year mandatory? or Is it just a service that the companies offer to attract customers or because your rival company is offering?

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    I believe that in order to get permission from the IRS to file electronic returns on behalf of tax-payers, tax preparers have to offer free basic federal tax filing; don't offer this free service and we won't accept any electronic tax returns from you, says the IRS. Commented Feb 19, 2015 at 15:44
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    @DilipSarwate Do you have a reference for that? I was just clicking around on the IRS website and didn't see anything obvious on the topic.
    – dg99
    Commented Feb 19, 2015 at 19:29

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The IRS provides this service for free, so the tax preparation companies want the customers to come to them instead.

States have similar programs, or participate in the IRS program. Here's an example from New York. Qualifications are similar. Some States require providers to participate instead of providing the service themselves.

Tax preparation companies rely on the fact that many of the taxpayers who qualify now (students, young people) will have higher incomes later and will return as paying customers.

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