Feds push free electronic filing

E-file: The IRS-backed program is free for those who qualify, but watch for additional, for-cost services.

January 30, 2003|By Gene Meyer | Gene Meyer,KNIGHT RIDDER/TRIBUNE

The Internal Revenue Service and 17 private tax software providers have launched a program offering free electronic tax preparation and filing to as many as 78 million households.

The participating companies include the biggest players in the field, such as H&R Block and TurboTax. The companies have varying criteria for qualifying; those who qualify will be able to do their taxes online and file them electronically for free.

Skeptical consumer advocates, however, say that the program, known as Free File, won't help taxpayers who can't afford Internet access and that it could be used to market pricey additional tax services to others.

IRS and other federal officials said the potential savings to taxpayers and to the government outweigh those concerns.

"Simply paying taxes is burden enough without the extra costs in time and professional help that too many Americans have endured until now," said Mitchell Daniels Jr., the White House budget chief.

Robert Wentzel, acting IRS commissioner, said: "E-file is quicker. E-file is more accurate. E-file is the best way to confirm that the IRS received your return, and it's your fastest route to a refund."

Free File does not include any help with state income tax returns. Consumers who need that help, or face-to-face assistance with tax problems, can get free help from federally trained Volunteer Income Tax Assistance program volunteers, AARP Tax-Aide volunteers or commercial tax preparers.

The Free File program results from an agreement that the IRS and the nation's largest tax software publishers reached last autumn.

The IRS agreed to scrap its efforts to create a federally run electronic filing system if the private companies would provide more free preparation and filing services to consumers.

The pact is a good deal for the government, the companies and taxpayers, said Block vice president Mark Ciaramitaro.

Encouraging electronic filing helps streamline tax collections, Ciaramitaro said.

"We are stabilizing the market by keeping the government out of a totally inappropriate role - being both tax collector and auditor," he said.

The IRS is under orders to try to convert 80 percent of the taxpaying public to electronic filing by 2007. Less than 40 percent of the public has switched so far, even though a record total of nearly 47 million electronic returns were filed last year.

Potentially 60 percent of taxpayers, or about 78 million, could use free preparation and filing by April 15 if everyone eligible uses the new service unveiled earlier this month.

"This is not a dumbed-down version of something we offer other clients," Ciaramitaro said. "It's identical."

Full details and links to the entire list of providers are available at www.irs.gov/app/freefile/welcome.jsp. Essentially, each company providing the service sets its own guidelines on who is eligible.

Many of the guidelines are based on adjusted gross income, but a few also hinge on age, state residency, military status or specific tax situations.

Details vary from provider to provider, so taxpayers who don't qualify for the free help from one company should check to see whether some other provider's offering will work, said Bill Barksdale, an IRS spokesman.

Those differences disturb Jean Ann Fox, consumer protection director at the Consumer Federation of America in Washington.

Her organization and three other consumer groups worry that the participating companies have been given too free a hand to sell tax loans, investment advice and other financial services through the Web sites.

The IRS doesn't endorse any of the tax loans or other offers that are part of the free package, and users are not required to buy them.

But Fox said the consumer groups would prefer that the offers be banned.

"A cynical person might believe that the companies are using free preparation and filing as a loss leader to sell their other products," she said.

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