Grassley Expresses Concern Over Hidden Expenses in Free File Program
APR. 14, 2006
Grassley Expresses Concern Over Hidden Expenses in Free File Program
DOCUMENT ATTRIBUTES
- AuthorsGrassley, Sen. Chuck
- Institutional AuthorsSenateFinance Committee
- Subject Area/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2006-7251
- Tax Analysts Electronic Citation2006 TNT 73-14
Friday, April 14, 2006
WASHINGTON -- Sen. Chuck Grassley, chairman of the Committee on Finance, is urging the Internal Revenue Service to rein in the commercial offers and charges for basic services that besiege taxpayers using the IRS' only option for electronic tax filing. Many of the companies participating in the Free File program offer numerous commercial offers and charges to taxpayers, according to a Finance Committee analysis.
The text of Grassley's letter to the IRS commissioner follows. The Finance Committee analysis is attached.
April 13, 2006
The Honorable Mark Everson
Commissioner
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224
Dear Commissioner Everson:
I am writing to you to follow up on an analysis performed by the staff of the Senate Finance Committee in preparation of our April 4th hearing entitled, "Filing Your Taxes: How Much Does It Cost?". One of the issues that we looked at in that hearing was the Free File program. An underlying principle of the Free File Alliance is that no one should be forced to pay to electronically file a tax return. That principle has been and continues to be eroded.
First, the new income restriction prohibits approximately 40 million taxpayers from using the service. Under the new contract, Free File Alliance members are prohibited from offering their services to anyone with adjusted gross income over $50,000. For the 2004 tax year, the Free File Alliance offered its services to 100 percent of taxpayers, without restriction. Certain Free File companies also have built-in restrictions on the type of income and expenses that taxpayers can have to use their Free File web sites. A taxpayer might have to pay extra for a particular tax form, or have to try another web site altogether.
It's not surprising that the use of the program has decreased more than 21 percent this year. The new income restriction is counterintuitive to the principle that no one should be forced to pay to electronically file a tax return.
Second, an analysis of the Free File companies performed by my Finance Committee staff indicates that use of the Free File programs may be anything but free. The participating companies use their Free File web sites to market a whole array of other products and services to taxpayers. These include additional fees for state return preparation and filing; resetting passwords; printing and mailing services; professional tax return review; audit protection; live chat help; telephone technical support; per-question fees for consultation with a tax professional; and vault service. Taxpayers entitled to a refund receive offers for anticipation loans; to have fees deducted from their refunds; or to get their refunds by cashier's check, prepaid visa card, or retail gift card -- all with hidden costs to the taxpayer.
One Free File site even contains a link where the taxpayer can sign up for a tax preparation franchise -- no experience necessary -- for $15,500. The tax preparation franchise web site tries to lure taxpayers into a "get rich quick" scheme by taking advantage of the 80 percent electronic filing goal by putting the following information on the welcome page:
"Are you aware that 40 million taxpayers currently file their annual tax returns electronically? The IRS expects that number to reach 80 million by the year 2007. That means 40 million more people will be seeking out tax preparers over the next few years who can E- File their taxes. YOU could be one the business owners they find."
These are among the reasons why I'm looking into allowing the IRS to provide a direct filing portal to enable all taxpayers to file electronically for free using the IRS web site. I'm very concerned that the IRS' last negotiations with the Free File Alliance allowed for the income restrictions and for participating companies to offer nearly any product at any price on their web sites. I'm not confident that the IRS put taxpayers first when negotiating the latest Free File agreement. I'm also worried that the IRS isn't providing enough protection for taxpayers by the obvious lack of oversight that would allow a company to attempt to mislead taxpayers into buying a $15,500 tax preparation franchise under the guise of helping taxpayers profit. $15,500 is a pretty big chunk of change for a taxpayer whose AGI is $50,000 or below.
I'm attaching a copy of the Finance Committee staff's analysis of the Free File web sites. I understand you may be planning to renegotiate the latest Free File contract. I hope you'll do that, and I urge you to consider this analysis. The IRS offers no other electronic filing option than the Free File program. It has an obligation to taxpayers to make sure "free" really means "free." I would appreciate hearing your response to these issues as soon as possible, especially prior to any renegotiation of the Free File agreement.
Sincerely,
Attachment
Chuck Grassley
Chairman
Online Tax Pros
Free File Criteria
FREE FEDERAL RETURN IF AGI is between $10,000 and $50,000
Other Services/Costs
o State preparation - $5.95
o State E-file - $3.95
o Mail return - $6.95
o Review by tax pro - $29.95
Payment Options/Refund Services
o Credit card
o Bank Products - No extra fees beyond Santa Barbara Bank and Trust fees
(can't pull up Bank Products page)
Notes
o Forms supported are W-2 / W-2G / 1099MISC / 1099-R / 1099-INT / 1099-
DIV / 1099-G / 1040 / 1040A / 1040EZ / Sch. A / B / C / D / EIC / SE /
2106 / 2441 / 3903 / 4137 / 5329 / 6251 / 8812 / 8901
o IRA deductions and 1099-G are listed as types of income allowed and as
forms not supported. Other forms are questionable - for example, under
" What is Not Supported by Online Tax Pros" lists, among others, Sch C,
C-EZ, D, E, F, H, J, R, SE - some of these are listed as forms
supported on the home page.
o Site offers English and half-Spanish, half-English.
o Recent tax law changes appear to all be up to date.
o Links are provided for various business opportunities, including:
1. Barter Exchange (ibtx.net) that offers to bring you at least $1,000
in NEW BUSINESS during your first 12 months with their exchange or they will
refund your initial membership fee (enrollment fee is $25 + 3-4% fee on each
exchange + $15.00 monthly accounting fee)
2. Tax Preparation Franchise (eztaxsoftware.com) - In addition to
electronic filing of tax returns, you will be able to offer your clients
several services in coordination with the bank products. Among the services
you will be able to offer is Refund Anticipation Loans and State Preferred
Refund Checks (where available). The capabilities of the software allows you
to place tax refund money into your client's hands first. At the same time it
ensures the the payment of your fees by having them deducted from the refund
and deposited directly into your bank account. Your client never has to write
you a check.
Each Time You Generate a Tax Return, TCOA Pays You $60.00!
Retail business is often slow during those first few months of winter, just
after the Christmas season. Your income potential can be greatly enhanced
during that short period of time between mid-January and mid-February. The
potential in earnings can effectively overcome the retail slump of those slow
winter months.
20 Returns = $1200 Gross Profit
50 Returns = $3000 Gross Profit
100 Returns = $6000 Gross Profit
200 Returns = $12000 Gross Profit
ONLY THE SKY LIMITS YOUR POTENTIAL IN THE E-FILE TAX BUSINESS!
3. Tax Centers of America - includes extaxsoftware.com (#2 above) plus
FaxTax (as low as $199) Fax Tax, a division of Tax Centers of America
(www.tcoa.net) , is an easy way to get you started in this fast growing
industry. All you need is a phone line and fax machine. When your customer
brings in his tax return information, you simply fax the information to Tax
Centers of America and we do the rest! It takes you only few minutes, you gain
a new customer and you make extra money during a time of the year when most
retail and cash business is low in many business venues. Refunds in 24 hours
through qualifying RALs (Refund Anticipation Loans)
WHAT YOU GET: Banners, signs, start-up kits, unlimited opportunity
At the push of a few buttons, you can generate a substantial income during a
short time, relax and enjoy the benefits of that income for the remainder of
the year.
With every tax return you fax to Tax Center of America, we will pay you"
$40 Per return
What can that mean to you?
100 returns = $4000
200 returns = $8000
500 returns = $20000
No experience is necessary. You don't have to be a tax professional - we do
all the work. What little training is needed, we will provide and all the
tech support you might need during the tax season is available to you during
all the business hours (7:00AM to 7:00PM - CST) toll-free. We'll even send
marketing materials and signage for you to promote your new business.
Franchise ownership = $15,500
EZ Tax Operator = $495
Tax Slayer.Com
Free File Criteria
FREE FED AND FREE STATE IF:
o AGI is 50,000 or less, AND
o One of the following: Age 25 or younger,
2. Age 65 or older,
3. Qualifies for EIC, OR
4. On active military duty
Other Services/Costs
o $9.95 Fed e-file cost (free state)
o $19.90 to Fed efile and download forms (see note)
o $9.95 state-only cost
o E-file your extension for FREE
o Featured products (with link) include life insurance (no medical exam
required - " Get $150,000 within 10 minutes") and an IRA application
Payment option/ Refund services
o Electronic mailed check (usually 18-28 days). Good for those without a
checking or savings acct. Cost = $9.95 for Federal (state free). Cost
charged to credit card.
o Direct deposit (usually 10-18 days) to checking or savings acct. Cost
= $9.95 (state free). Cost charged to credit card.
o Bank Bonus Direct (usually 10-18 days) to checking or savings acct
(direct deposit but no out of pocket expense). Cost = $27.95 ($18 Bank
One Fee + 9.95 TaxSlayer Fee). Fee is deducted from refund.
o RAL (1-4 business days after loan is approved - no guarantee of date).
Cost = $68.95 ($59 Bank One Fee + $9.95 TaxSlayer Fee) for a loan
amount (refund minus EIC) between $200 and $1,499 or $88.95
($79 Bank One Fee + $9.95 TaxSlayer Fee for a loan amount between $
1,500 and $2,500. Fee taken out of refund loan. Any remaining refund (
above $2,500 or EIC amount) will be deposited after 14-21 days.
Notes
o When you click on the link on the home page to " Get your $in as
little as 24 hours" it brings you to a list of ways to get your refund.
At the bottom of the page there is a link " Back to TaxSlayer Home."
This link does not bring you back to the free file page - it brings you
back to the home page for TaxSlayer.com which has a starting price of $
9.95. If you close out of the window, the free file offer is no longer
open as a window.
o The same is true if you use the link from the free file page for "
Visit our Help Center" - there is a link at the top of the page that
brings you back to the site costing $9.95. But, if you close out of
the window, you can get back to free file (free file offer is still
open as a window).
o Every linked page (other than start now) from the free file page
contains a link back to the home page that charges $9.95. (Tell-a-
friend link is to promote the $9.95 website).
o Article on website discussing dependents and/or qualifying children
information do not cover the new uniform definition of a child rules.
o Free file offers includes a large amount of tax forms (with titles).
Forms available for download that are not available for web filing
include mostly business returns, but also include forms that apply to
lower income individuals, such as Form 8396, Mortgage Interest Credit (
this form may also confuse taxpayers who think that they need this form
and therefore download), Form 8828, Recapture of Federal Mortgage
Subsidy, Form 8885, Health Coverage Tax Credit (also may cause
confusion), and Form 9465, Installment Agreement Request.
o When the mouse scrolls over the advantages of downloading, every form
listed in bullet are forms that are available without download.
OLT.Com
Free File Criteria Other services /
FREE FEDERAL RETURN IF:
o AGI is in between $10,000 and 50,000
Other Services/Costs
o $7.95 state return.
o $7.95 Federal e-file cost.
o Free on-line support.
o Free extensions.
o $7.95 to order a CD or download software to " complete and file
straight forward 1040EZ returns." o OLT review - professional CPAs
review your Fed and state returns for errors and costly mistakes - $
49.95.
o Amended return tax software - $49.95.
o Prior year software (fed or state) - $12.95 each
o Printing service (OLT will print all your forms and send them to you
in the mail) - $4.95 ($9.95 for foreign addresses)
Payment option/ Refund services
o Credit card - $7.95 (for tax preparation of your Federal return)
o Pay Pal - Pay Pal account must be set up prior to completing return.
o Pay by refund - (direct deposit but no out of pocket expense) - SBBT (
Santa Barbara Bank and Trust) will deduct cost from your fed income tax
refund when it arrives - $21.95 ($7.95 filing fee plus $14 bank fee)
(may take an additional 2 days to receive refund ). To receive your
state refund this way, there is an additional cost of $15.90 ($7.95
filing fee plus $7.95 bank fee).
o Refund by Cashier's check - $28.00
o RAL - starting at $29.00 (2-4 business days after loan is approved).
Notes
o State refunds may also be received via refund services listed
(presumably at same charge as for Fed return).
o Offers a large amount of forms supported (and lists titles of forms
supported)
CompleteTax
Free File Criteria
FREE FEDERAL RETURN IF AGI is $29,000 or less
Other Services/Costs
o $9.95 state return.
o $24.95 Federal e-file cost.
o Free electronic filing with paid processing.
o CompleteTax files both your federal and resident state returns.
o File electronically and you may qualify to use the RAL service, which
lets you get your money FAST!
o Our useful Tax Guide provides tax tips and straightforward answers to
your tax questions.
o If you owe a balance due, you can conveniently pay it by credit card.
This service is available for Federal taxes and certain states.
o Take advantage of FREE email support, or an online chat service that
gets your technical questions answered by tax program experts for a
small fee ($4.95 for two separate sessions) (tax program experts work
with you until your tax return issue is resolved.
o If you get your refund through a RAL, there is no additional cost to
pay your preparation fee from your IRS refund.
Payment option/ Refund services
o Most forms are supported. Titles of forms are listed.
o Debit or Credit card - through officialpayments.com (a 2.49%
convenience fee applies based on the fed. balance due amount; the
convenience fee for state payments may vary; a $1 convenience fee is
charged for all payments less than $40).
o Pay by refund (refund processing transfer) - (direct deposit but no
out of pocket expense for fees) - HSBC Bank USA, N.A will deduct cost
from your fed income tax refund before it is deposited into your
account - $14.95 (in addition to the tax preparation fee) (refund
must be large enough to pay the preparation fee and the bank processing
fee.
o RAL - (2-4 business days after your return is accepted by the
IRS)(available for fed refunds only)
Amt of Refund Loan App. Fee
$200-500 19.95
$501-1,000 49.95
$1,001-1,500 69.95
$1,501-2,000 79.95
$2,001-9,500 104.95
If refund is more than $9,500, excess refund goes into TP account at no extra
cost. Loan application fee only applies to accepted loans - if loan is not
accepted, only a $14.95 fee will apply.
Loan Amount
RAL Finance Charge
Estimated APR %
$500
$5.00
33 %
$750
$35.00
162 %
$1,000
$35.00
120 %
$1,500
$55.00
126 %
$2,000
$65.00
111 %
$3,000
$90.00
102 %
$4,000
$90.00
76 %
$9,500
$90.00
31 %
If loan is accepted but not paid back after 2 IRS payment cycles, a 1.5% late
fee will be assessed monthly (along with interest)
Notes
o RAL loan application fees do not include interest on the loan, which
ranges from 31% APR - 162% APR.
EZTaxReturn.Com
Free File Criteria
FREE FEDERAL RETURN IF:
o AGI is $50,000 or less, AND
o Between ages of 16 and 51
Other Services/Costs
o State return -$9.95
o $19.95 - ezInterview (includes federal, state, and e-file)
o Post-May 15 Download - $9.95
o Tax return by fax - $14.95
o Tax return by first class mail - $19.95
o Tax return by overnight mail - $34.95
o Unlimited customer service for free filers - $4.95 (free to
paying customers)
Payment option/ Refund services
o Refund transfer - $15.00
o RAL - Santa Barbara Bank and Trust
Loan Amount Fee
$0-$500 $29
$501-$1000 $44
$1001-$1500 $69
$1501-$2000 $84
$2001-$5000 $109
Notes
o Only 12 forms/schedules (including W-2, W-2G, and 1099-R) are
supported as basic fill in forms (16 in the premium
ezInterview) - it is unclear why W-2, W-2G, and 1099-R are
referenced as supported forms but not the 1099-INT or DIV when
Sch B is one of the forms supported - same ? with Sch D as
being supported but not 1099-B - these types of income are
allowed using the program.
o Basic fill in forms are 1040 / A / B / D / EIC / 2441 / 3903 /
8812 / 8863 / W-2 / W-2G / 1099-R (with limitation s on
certain forms)
o No titles of forms are listed.
o Additional forms supported by interview (for $19.95) are
2106 / 4684 / 8283 / 8880. Each of these supported forms have
limitations including the limitation for Form 8880 that
provides " Form 8880 Limitations
ezExplanation:
In an effort to deal with the absolutely ridiculous complexity of the
newest tax law, we regret to announce the following ridiculously
complex Saver's Credit limitation:
If you are filing a joint return with your spouse this year but did
not file a joint return with your spouse in one of the previous two
years, and if you or your spouse received an IRA or pension
distribution in a previous year when you did not file a joint return
together, your Saver's Credit may be limited by a few dollars more
than it should be.
o If you have a more complex return (i.e., having certain types
of income or expenses), a link on website brings you to its
partners page - HR Block ("the very best company for preparing
complex returns such as yours.") which shows a starting cost
of $29.95 for federal
o If you need a form that is not supported, a link brings you to
formsend.com that charges you a " nominal fee" for delivery of
the forms (including download) - cost to email, download, or
fax form or instructions is $2.99. When you click to view a
form from that website, the display gives an ad for Tax Act
(another Free File alliance customer) that says everyone can
efile for free (however Tax Act has restrictions).
Tax Act
Free File Criteria
FREE FEDERAL RETURN IF:
o AGI is $50,000 or less, AND
o You live in AL, AR, AZ, CA, CO, CT, DC, DE, GA, HI, IA, ID,
IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, NE, ND, NH, NJ,
NM, NY, OH, OK, OR, RI, SC, UT, VA, VT, WI, or WV
Other Services/Costs
o state return - $12.95 (plus $7.95 to e-file if you use the
download/cd version)
o $7.95 to e-file federal return if you don't qualify for free
file
o Online Deluxe - Complete and efile your federal taxes with
extra help and advice, plus life event guidance - $9.95
(state return, including efile - $6.00)
o Ultimate Bundle - Complete and efile both federal and state
tax returns. Packed with enhanced Deluxe help and advice - $
15.95
o Tax Act Deluxe - $12.95 (download/cd format [ cd format -
must add $5.95 for shipping]) - allows you to prepare and
print unlimited federal returns (one free efile; efile up to
4 additional fed returns for $7.95 each), extra help and
advice, plus life event guidance
o Tax Act Ultimate Bundle - $19.95 (download/cd format [ cd
format - must add $5.95 for shipping) - allows you to prepare
and print unlimited federal returns (one free efile; efile up
to 4 additional fed returns for $7.95 each), extra help and
advice, life event guidance, and more. Also allows you to
prepare and print your state return for free ($7.95 to efile
the state return).
o File an extension for free
Payment option/ Refund services
Notes
o Link that appeared at the bottom of the home page between 2/10
and 3/9 says " Learn about other FREE offers from TaxAct" This
link brings you to a page that says you can prepare your
federal return for free with no restrictions (free for
everyone - no restrictions - prepare, print and efile for
Free). Free offer is also available through taxact.com.
However, according to the Memorandum of Understanding, entered
into as of 12/20/05, the IRS will not accept or post any offer
by a member which exceeds the $50,000 AGI amount.
o Doesn't appear to have any info on payment options or refund
services on home page.
o Does not have a list of forms supported.
123EasyTaxFiling.Com
Free File Criteria
FREE FEDERAL RETURN IF AGI is between $10,000 and $50,000
Other Services/Costs
o $14.95 - Federal
o State return - $6.95 per state
o Extension - free
o Audit insurance - $24.95
o Paper tax return copies (on original IRS forms suitable for
filing) - $7.95
o Printable tax return summary - free
o Consult a tax professional - $6.95 per question
o Live chat help (unlimited use)(T, Th, F, Sat 10-10; W 10-8) -
$19.95
o Free online support/customer service
o Prepare and file prior year tax return (on paper - IRS does
not allow efiling of prior year return) - $7.95
o $4.95 resubmission fee after 2 rejects
Payment option/ Refund services
Website only talks about using direct debit for payment but the "
testimonial s" talk about using paypal to pay.
Notes
o " Absolutely no pop-ups"
o Only seven state returns are supported CA, OH, NY, WI, GA, IN,
IL, VA (eight states as of 3/9 - VA added). Many of these
states have free internet filing.
o Consult a tax professional - $6.95 per question - does this
include follow up questions?
o Tax tips section discusses two items - the first is education
credit / tuition and fees deduction and the other is the
advance child tax credit (a 2003 tax issue). The education
credit / tuition and fees deduction lists the deduction amount
as $3,000 [ the 2005 tuition and fees deduction is $4,000 $
2,000, or $0 depending on AGI]. The text is also unclear in
that it says " Form 8863, Lifetime Learning Credit has been
increased to $10,000" instead of saying that the maximum
amount of qualified expenses that can be taken into account
for the credit is $10,000 (the credit is limited to $
2,000/$4,000 for education in the Gulf Opportunity Zone).
The second item states " In the personal information section
you will input the amount of Advanced Child Tax Credit you
received. If your filing status in Tax Year 2002 was married
filing jointly this amount may be one-half of the amount of
the check deposited into your bank account . . . ." This whole
write-up is inapplicable to tax year 2005 (not to mention
that it is poorly worded).
o Prices and AGI requirements changed between 2/10/06 and
2/14/06. On 2/10, you could efile your fed return for free if
your AGI was less than $29,000 - otherwise it cost $10.95 (
now $14.95) and extensions were $3.95 (now free)
o There also must have been an interim AGI level of $33,000 or
less, because on 2/27 the FAQ/Fees page originally said if
your AGI is over $33,001, it costs $14.95 to efile fed
return. Later that same day this page was updated to reflect
AGI levels between $10,000 and $50,000.
The IRS summary page shows that on 2/14 the AGI levels were
between $10,000 and $50,000 - so when was it at the $33,000
level - why was it still showing this level on 2/27?
o The supported forms are W-2 / W-2G / 1099-G / 1099-INT / 1099-
DIV / 1099-R / SSA- 1099 / Sch A / B / EIC / 2106EZ / 2441 /
3903 / 4137 / 8812 / 8332 / 8863 / 8880 / 4868.
Titles of forms are listed. However, there is also a list of
limitations and unsupported items to supported forms. One of
these limitations is Hurricane Katrina relief - what does this
mean in terms of Schedule A and Form 8863? How will people
know that they can elect to use prior years earned income -
they can't on this site - I don't know how the other sites
handle this.
o Under " New Features" the website says that it now has support
for people who were denied the EIC in a previous year, but the
supported forms for tax year 2005 do not list Form 8862,
Information to Claim Earned Income Credit After Disallowance.
(Free1040taxreturn.com)
Free File Criteria
FREE FEDERAL RETURN IF:
o AGI is under $50,000, AND
o You live in AZ, CA, CO, CT, DE, GA, HI, IA, ID, IL, IN, KS,
KY, LA, MD, MI, MO, MS, MT, NC, ND, NE, NJ, NM, NY, OH, OK,
PA, RI, SC, UT, VA, VT, WI, or WV
Other Services/Costs
o Federal return - $19.88
o state return - $9.88
o Customer service questions - $4.88 per question
o Consult a tax pro - $14.88 per question
o Paper Federal return - $9.88
o Paper state return - $9.88
o Audit protection - $29.88
o Rejected return help - $4.88 per rejection code
o Printable return summary - FREE
Payment option/ Refund services
o Credit card for services
o Direct debit for amount you owe - maybe credit cards too (?)
o Direct deposit of refund or mailed refund.
Notes
o Customer service / consult a tax pro - per question fee - does
this include follow up questions?
o EIC link still has 2004 EIC figures on 3/9/06.
o Only two state returns (NY and KS) (five states as of 3/9/06
- CA, KS, IL, OH, and NY) are supported by the software - a
little deceptive to those filers from the 33 other states
listed on home page. All five of the states offered can be
filed for free on the state website.
o Only 15 forms supported (W2/W2G/1099G/1099R/
A/B/D/EIC/2106/2441/3903/4137/8812/8863/8880).
o No form titles are listed.
o These forms are not reflective of the financial situation
described as being supported. Website (right above where it
lists the forms supported) says you can have only income from
wages, salary, or tips, interest income, unemployment, state
or local income tax refunds, social security benefits and you
would like to take the EIC - no mention of supporting credit
for child and dependent care expenses, child tax credit,
education credits, or credit for retirement savings
contributions that are associated with Forms
2441/8812/8863/8880).
o Although Sch B is listed as a supported form, the forms
limitations link provides for " unsupported elements" such as
the fact that the software does not support tax-exempt
interest or the Sch B lines related to tax-exempt interest,
the Sch B lines for nominee distributions, OID adjustments,
accrued interest, etc.
o More importantly, the software assumes that the answer to the
foreign account question is No. If you are required to File
Form 90-22.1 but do not do so, you may have to pay a penalty
of up to $10,000 (more in some cases) [ American Jobs
Creation Act of 2004, section 821, amending 31 USC 5321]
o Only does a 1040 or 1040EZ - does not do a 1040A return -
these filers presumably would file the longer form
CitizenTax
Free File Criteria
FREE FEDERAL RETURN IFAGI is between $10,000 and $50,000
Other Services/Costs
o Federal return - $4.95
o state return - $8.95
o Ernst & Young Tax Guide 2006 is available for download for
only $7.99
o Free extension
Payment option/ Refund services
o RAL available from Republic Bank and Trust Co.
o Electronic Refund Deposit - allows you to pay any fees
directly from your refund - remainder of refund will be
deposited in 9-16 days
o No info is provided on the cost.
Notes
o Forms supported are 1040 / 1040A / 1040EZ / 1040ES / 1040V/ W-
2 / 1099-MISC / 1099-R / 1099-INT / 1099-DIV / 1099-G / 1099-B
/ SSA1099 / Sch A / B / C-EZ/ D / R / SE / EIC / 2441 / 3903 /
4952 / 5329 / 4868 / 4684 / 8812 / 8863 / 4137 / 2106 / 8453-
OL / 8880.
o No form titles are listed.
o When you click on "Contact Us" the information page says that
state e-filing is not yet available (2/28/06). The state
support page shows 2 states (other than the 7 states that do
not have an income tax)(3 states as of 3/9/06) as being
supported (with 12 other states to be supported " as soon as
we are able") (11 states as of 3/9/06).
Also, there is a disclaimer that " Please note that not all
tax forms all supported for each State."
H&R Block's Tax Cut
FREE FEDERAL RETURN IF:
o AGI is $50,000 or less, AND
o 50 years of age or under
Other Services/Costs
o State return - $19.95 (was 14.95 on 2/28 and was $24.95 on
2/10/06)
o Tax Cut EZ - $9.95 (free Fed efile, worry-free audit
support, state return (for a fee), personalized financial
review, mortgage advisor (plus, request a one-onone
consultation with an H&R Block mortgage professional), and
more
o Tax Cut Premium - $19.95 (includes additional features of
one free consultation with an H&R Block tax professional,
interactive video library, advanced tax assistant tools to
help identify all the deductions you deserve, tax tips and
advice, save with Express IRA offered through H&R Block
Financial Advisors, and phone support)
o Free federal plus one FREE state if you put your refund on an
H&R Block prepaid VISA prepaid card (see notes)
Payment option/ Refund services
o RAL - $29.95-$89.95
o Simple Pay - pay your tax program fee from your tax refund
amount - $19.95
o EZ Pay - once approved, you can pay your balance due over 90
days, interest free - if you need more than 90 days, you can
pay off your balance in monthly installments (subject to
credit approval).
Notes
o Claims on the home page that it supports all 1040 forms. When
you click on Supported forms, it says that Nearly all federal
tax returns can be completed. Among the missing from the list
are Forms 8853 (Archer MSA) and 8889 (HSA).
** Put your refund on the Visa Prepaid Card. The H&R Block Refund
Visa Prepaid Card is issued by BankFirst, member FDIC.
Usage fees may apply. H&R BLock may receive a portion of card account
fees and/or interchange fees. See Account Agreement for more
information.
o According to a website (forums.gottadeal.com), the following
fees are related to the prepaid visa card:
Domestic ATM withdrawal fee: 1.00
Domestic ATM balance inquiry fee: 0.50
International ATM withdrawal fee: 2.00
International ATM balance inquiry fee: 1.00
ATM denial: 0.50
Customer service live agent fee (after first two calls): 2.50
PIN purchase transaction fee: 1.00
Over the counter withdrawal: 15.00
Overdraft fee: 10.00
Additional card fee (1 maximum): 10.00
Replacement card fee: 10.00
Express delivery fee: 25.00
(I have no idea what this could be) Check request fee: 15.00
Duplicate paper statement fee: 2.50
Montly maintenance fee after three months if balance is below $100: 2.50
1040NOWEXCELTAX@FREEFILE
Free File Criteria
FREE FEDERAL RETURN IF:
o AGI is $50,000 or less, AND
o You live in AL, AR, AZ, CA, CO, CT, DC, DE, GA, HI, IA, ID,
IN, KS, KY, LA, MD, MI, MO, MS, MT, NC, ND, NE, NJ, NM, NY,
OH, OK, OR, PA, RI, SC, UT, VA, VT, WI, or WV
Other Services/Costs
o Form 1040EZ - $9.95
o Form 1040/1040A - $19.95
o state return - $14.95
o Paper filing is free to all taxpayers
o Free e-filed extension (Form 4868); other extension forms - $
9.95
o Free online support
o Free email technical support
o Telephone technical support - $29.95 per return
o Paper filing of Form 1040X amended return - $12.95
o To restore your account after it has been cleared by user
- $19.95
o To restore account's username and password - $19.95 - used if
you cannot recall your password with your password hint
o Printing and Delivery Services:
a. Self printing of your federal or state tax returns - Free
b. Print copy of your federal tax return - $19.95
c. Print copy of your state tax return - $19.95
d. Print copy of your 8453-OL - $12.95
e. Print copy of your amended tax return (1040-X) - $12.95
f. First Class Mail - included
g. Express shipping - $19.95 (1-3 days)
o Prior year returns - $9.95 for 1040EZ; $19.95 for 1040A; $
29.95 for 1040
Payment option/ Refund services
Electronic Refund Anticipated Check (fee deducted
from your tax refund) - An authorized 1040Now Refund Anticipated
Account has been setup to receive the direct deposit of your tax
refund. This is not Refund Anticipated Loan (
RAL).
When the Bank receives the direct deposit of your tax refund, a
check, less any authorized fees, is issued and sent to you by mail or
direct deposit. Please allow up to 5 to 10 working days
from the date your tax refund is available, to receive
your refund check or direct deposit . After 10 days, if you
have not received your refund check or direct deposit, please notify
Online Support, we will stop payment or direct deposit, and then send
to you another check by mail.
Please be advised that 1040Now Refund Anticipated Bank Account will
appear on your tax return's direct deposit information.
Federal Tax Refund Processing Fee - $29.95
State Tax Refund Processing Fee - $19.95 / per
state refund
Regular First Class Mail - included
Direct deposit is available - included. It is subject to direct
deposit account verification.
Overnight Mail - $19.95 (additional)
Notes
o Very extensive list of forms available (with titles)
Free File Criteria
FREE FEDERAL RETURN IF:
o AGI is $50,000 or less, AND
o You live in AL, AZ, CA, CO, CT, GA, IA, IL, IN, KS, KY, LA,
MD, MI, MO, NC, NJ, NY, OH, OK, OR, PA, SC, UT, or VA
Other Services/Costs
o state return - $9.95
o Federal return - $9.95
o Free printed copy of tax return in PDF format
o Professionally printed copy of tax return mailed to you - $
5.95
o Professionally bound copy of federal and state tax returns - $
12.95
o Tax return on CDROM (in PDF format) - $12.95
o Free access to view or print your tax return until Oct 15th.
o Vault service - allows access to view or print your income tax
return for 5 years - $9.95
Payment option/ Refund services
o Credit card and e-check payments allowed.
Notes
o Forms supported are W-2 / W-2G / 1099-G / 1099-INT / 1099-DIV
/ 1099- B / 1099-R / SSA 1099 / 1099-C / 1098- T / 1098 /
1098-E / 3903 / Sch A / EIC / R / 2106 / 2441 / 3903 / 4952 /
8283 / 8812 / 8863 / 8880 (descriptions given).
o Company offers all state returns for states shown on home page
(for free file criteria).
o No third party advertising appears on the FreeTaxUSA website.
TAX$IMPLE.com
Free File Criteria
FREE FEDERAL AND STATE IF
AGI is $29,000 or less.
Other Services/Costs
o state return -$7.95
o Federal return -$9.95
o Business Federal, state and city - (1120/1120S/1065/1041) -$49.95
(each type)
Payment option/ Refund services
o Refund anticipation loan is offered, but details are not on
home page.
Notes
o Website seems to be purely fillable forms instead of
interactive, but I was not able to get into the system.
o Individual tax software forms has an extensive listed (no
titles).
o When you are on the initial landing page, you are offered to
have your tax return printed for you or to get a PDF and CD
sent to you for a fee of $19.95. It is unclear if this charge
applies if you print your return yourself.
o A lot of links bring you to particular locations on irs.gov
(forms/pubs, tax info, refund cycle, etc.)
TURBOTAX ® FREE FILE
Free File Criteria
FREE FEDERAL RETURN IF:
o AGI is $50,000 or less,
AND
o You live in AL, AR, AZ, CA, CO, CT, DC, DE, GA, HI, IA, ID,
IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, NE, ND,
NJ, NM, NV, NY, OH, OK, OR,RI, SC, UT, VA, VT, WI, or WV
Other Services/Costs
o state return - $12.95
o Essentials - transfers last year's TurboTax data; step-bystep
instructions - Fed - $9.95 /State - $12.95
o Deluxe - additional tax guidance for more involved returns;
helps check for deductions; import W-2, 1098, and 1099 info
from participating companies - Fed - $19.95 / State - $12.95.
o SnapTax for TeleFilers - file in minutes; refund in days -
$5.95
Payment option/ Refund services
Notes
o Covers all federal tax forms.
o Prices determined at time of print or efile and are subject to
change without notice.
o State return price on 2/10 was $24.95
o On 2/10, free file home page contained a link to TurboTax
refund bonus - whereby TurboTax has teamed up with over 50
retailers to increase the value of your refund by buying gift
cards and getting additional bonus dollars - us as much of
your federal refund as you want to buy gift cards - the rest
gets deposited to your bank account (program fee, e-file fee,
and taxes apply). This link from the home page was gone on
3/8. Turbotax.com lists the shipping and handling and
processing fee for this at $14.95 (plus sales tax in a limited
number of states). Refund gets processed through Santa Barbara
Bank and Trust. Cards do not have an expiration date, but
other terms and conditions may apply (must read each
retailer's gift card terms and conditions).
EFILETAXRETURNS.NET
Free File Criteria
FREE FEDERAL RETURN IF:
o AGI is $50,000 or less, AND
o You live in AL, AR, AZ, CA, CO, DC, DE, GA, IA, ID, IL, IN,
KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, NE, NJ, NM,
NY, OH, OK, OR, SC, VA, VT, WI, or WV
Other Services/Costs
o state return (for residents of AZ, CA, CO, DE, GA, MI, NC, OH,
and WI only)(i.e., those processed with your federal return) -
$19.95
o Other state returns (although no other states are supported) -
$22.95
o Federal return - $24.95
o Unlimited self-printing of returns through 6/30/06
o Self-printing of returns after 6/30/06 - $10.00
o Normal email support through 6/30/06
o Copies of return suitable for filing, if you choose to file a
paper return instead of efiling - $14.75
o Free email support
o Customer service support by phone - $9.99
o Amend your federal tax return filed from our site - $28.95
o Audit protection for 2005 federal tax returns - $47.95
o Resetting of password - $24.95
o Payment reversal fee - $20.00
o Change from electronically filed tax return to paper return -
$15.00
o Credit card charge back - $29.00
o Bank product application fee - $14.00
Payment option/ Refund services
Notes
o Under the FAQ, the Site says it provides quick links to
irs.gov and states that the taxpayer can also call the IRS 24
hours a day, 7 days a week.
o Under "Available online Services,it says twice that "We do not
provide tax advice". However, on the home page, there is a
link to "Free tax advice" and they provide various online
brochures on certain topics (tax planning, small
business,retirees, etc.)
o There is a link for "Get your refund faster" but it does not
seem to be active.
o Forms supported are A / B / C / D / EIC / H / SE / R / W-2 /
W-2G / 1098 / 1099-INT / 1099-DIV / 1099-G / 1099R / 1310
/ 2120 / 2441 / 3903 / 4137 / 5329 / 8283 / 8332 / 8396 / 8829
/ 8862 / 8863
o Titles are not provided for the forms supported
o Only 9 state returns are supported even though front page
allows residents from 36 states to use federal free file
program.
eSmartTax.com
Free File Criteria
FREE FEDERAL RETURN IF:
o Between Ages of 19 and 53
AND
o AGI is less than $50,000
Other Services/Costs
o state resident return - $9.95
o State nonresident: $14.95
o Standard federal - $9.95
o Premium federal - includes Federal return, extension of time
to file, complete CCH tax guide, and the ability to import
from last years return and "Cloning" (see notes) - $12.95
o Print returns until 10/15
o Resubmit is free
o Federal amended return - $19.95
o State amended return - $9.95
o Form 4868 (extension) - $9.95
Payment option/ Refund services
o Does not support RALS - We believe the typical cost of a RAL
is too high for the few days of convenience for the taxpayer.
o Credit card payments of tax through IRS authorized providers
o Esmart payments can be made by credit card or e-check
(additional fee will be added for a rejected check)
System does not support debit card payments.
Notes
FORMS:
1040, 1040A, 1040EZ, 1040V, 1040X, 1099R, 1116, 1310, 2106, 2106EZ,
2120, 2439, 2441, 2555, 2555EZ, 2688, 3903, 4136, 4137, 4562, 4684,
4797, 4835, 4868, 4952, 4970, 4972, 5329, 6198, 6251, 6252, 8283,
8332, 8379, 8396, 8453OL, 8582, 8606, 8615, 8812, 8814, 8815, 8829,
8839, 8853, 8862, 8863, 8880, 8885, 8889, 8901, 8903, 9465, Sch. 1,
2, 3, A, B, C, C-EZ, D, D1, E, EIC, F, H, J, R, SE, W-2, W-2G, W-2GU
o Supports all states
o Home page says that the premium version costs $14.95 if
completed before 2/15. Under the price link, the premium
version shows a cost of $12.95 (3/10).
o Premium version advertises the following feature:
"Clone" Federal Return - Allows "What if" tax returns
Figuring out the best possible tax return is always a
challenge. eSMARTtax's Clone feature allows you to make a copy
of your Federal tax return and easily play "What If" scenarios
with the data. Based on the best outcome, you can then choose
which return to file.
o Tax payment deadline is April 15th, no matter how you pay.
With papercheck, the payment and voucher need to be mailed
before April 15th. With Direct Debit, you can set a withdrawl
date on any day before April 15th. Even if you have filed an
extension, Form 4868, you still need to pay (estimate) before
April 15th. Otherwise, the IRS may add interest and penalties.
o Tax professionals can also use the site
o Site offers an in-depth faq page to answer questions
associated with the site and efile in general
o Can print previous eSmartTax return for a $30 retrieval fee
o Site says it offers English and Spanish but when you click on
the Spanish link from the home page, it discusses (in English)
that Spanish has been added. It does not translate the page
that you are on - it just brings you to an explanation that
Spanish has been added.
FileYourTaxes.com
Free File Criteria
FREE FEDERAL RETURN IF:
o AGI is less than or equal to $50,000
AND
o State of residence AL, AR, CA, CO, DE, GA, IL, KN, KE, LA, MD,
MI, MS, MO,NJ, NY, NC, OH, OK, OR, or WI
OR
o age 18 or under as of 12/31/05, regardless of where you live,
AND
ALSO,
o Do not combine bank products with their filing
Other Services/Costs
o State return (if filed with Federal return) - $19.00
o State return (if filed separately without Federal return) - $19.75
o If you qualify for the CA State Form 540-2EZ w/ additional
limitations, will construct return and efile with no
additional charge
o Federal return - Basic fee for Forms 1040EZ, 1040A, or 1040
with unrestricted self printing and online customer service
for six months - $19.95 (see below for charges for additional
forms)
o Email customer service option - unlimited online service for
one year when purchased within the original data entry -
$12.00
o Email customer service option - unlimited online service for
one year when purchased outside or after the original data
entry - $15.00
o Telephone customer service - one telephone customer service
incident - $15.00
o Form 56 (Notice concerning fiduciary relationship) - $21.95
o Form 9465 (Installment agreement request) - $19.95
o Past season basic return fee - $65.00
o Paper check handling charge for payment of our fees - $12.50
o Extension forms - Form 2350 - $19.25; Form 2688 (obsolete for
2005) - $19.75; Form 4868 - $18.75; paper extensions
(individual and/or gift tax returns) - $14.25
o Each additional form - $4.00 each (Sch 1 / 2 / A / B / C / D /
E / EIC / F / H / SE / 982 / 1310 / 2106 / 2120 / 2441 / 2555
/ 3903 / 4136 / 4137 / 4562 / 4797 / 4952 / 5329 / 6251 / 6252
/ 8271 / 8283 / 8582 / 8606 / 8812 / 8824 / 8829 / 8862 / 8863
/ 8880)
o More than 3 W-2s and/or 1099Rs - $1.00 each; W-2G - $1.00 each
o Correction of the provided information and retransmission of a
corrected rejected return by you - FREE
o Correction of the originally provided information and
retransmission of a rejected return or ordered paper returns
by our staff, or resetting passwords - $35.00 and up.
o Payment reversal fee by us (if possible) - $15.00
o Flip-to-paper return fee (if possible) - $12.50
o Credit card charge back fee, returned check fee or any other
collection related fee - $35.00
o Delivery of your e-filed tax copies and Form 8453-OL - Free
online download - otherwise delivery charges range from $9.75
- $32.50 - "To be quoted"
o Free Federal extensions to file (F4868) are offered conditionally
o Allows business efiling. Efile and print up to 5 W-2s or 1099s
free. First 3 filings of certain other forms are also free.
o Personalized customer service if needed is provided for a fee.
o Online printing of a filed return by you downloading a pdf is free
o FileYourTaxes.com will not reverse the character of a return
from being a fee based return to a free return without
assessing a minimum service fee of $35.00.
Payment option/ Refund services
o Direct debit and automatic withdrawal of funds are available.
o Accept payment by credit card and check
o RALs and refund transfers offered through Santa Barbara Bank
and Trust. Application fee from fileyourtaxes.com for RALs and
Refund transfer is $14.00. This is in addition to the bank
fees.
o RALs - 2-3 days between IRS acknowledgment and RAL deposit.
Minimum of $300, maximum of $5000. There is no EIC surcharge
this year.
o The following table is provided by the BANK showing
their hypothetical, representative information for
demonstration purposes, of loan amounts and corresponding
Finance charges and the associated Annual Percentage Rate
(APR), and does not reflect the other authorized fees.
Loan Amt
Bank Fee
APR (%)
500
29
224.73
750
44
227.48
1500
69
176
2000
84
160.02
3000
109
137.62
5000
109
81.23
o Refund Transfers - service/user and application fees plus
bank's RTDD fees are paid out of the refund - $14.00 + $28.00
bank fee.
Notes
FORMS: 1040, 1040A, 1040EZ, Sch. 1, 2, 3, A, B, C, D, E, EIC, F, H,
R, SE, 56, 982, 1310, 2106, 2120, 2350, 2441, 2555, 3903, 4136, 4137,
4562, 4684, 4797, 4868, 4952, 5074, 5329, 6251, 6252, 8271, 8283,
8396, 8582, 8606, 8812, 8824, 8829, 8862, 8863, 8880, 8901, 8903,
8914, 9465
o Site gives names of forms
o Site lists limitations on almost every form offered above Tax
returns and extensions, when available, are two separate
filings. If the return is tagged as a free return, it will not
tag the extension filing as a free process, and the other way
around. Each have to be tagged independently to qualify for
the respective free offer.
Average1040.com
Free File Criteria
FREE FEDERAL RETURN IF:
o AGI is $50,000 or less
AND
o Use AZ, GA, MI, NC, or NY in tax return mailing address
Other Services/Costs
o Full resident state tax return can be filed for AZ, GA, MI, or
NC for an additional fee of $5.62 ($3.99 for filing, and
$1.63 for service charge)
o If you DO NOT qualify for a Free Federal return under our Free
File Alliance E-file Offer you will qualify for a free state
return under our free state return offer - Federal return will
cost $5.62.
Payment option/ Refund services
o Cost charged to credit card.
o The site does not offer a paper check refund option. The filer
must have a bank account for direct deposit.
Notes
FORMS:
o 1040/A/B/D//EIC/R/2441/3903/5329/8283/8812/8863/8880
o 1040A/1/2/3/8812/8863/8880
o 1040EZ
o State returns are available for residents of AZ, GA, MI,
and NC. Otherwise, website offers links to various states
that offer free filing through the state websites. If you do
not qualify for the state free filing, website offers links to
MSN Money and Federation of Tax Administrators for free
state return forms.
CONDITIONS TO USE SITE:
o Federal return must fit within Federal forms and schedules;
o Filing status must be: single, head of household or married
filing jointly (neither primary taxpayer nor spouse is
deceased);
o Election to include combat pay in earned income (for EIC) is
not available;
o Additional exemption amount not available if provided housing
for person displaced by Katrina;
o If your main home was in the Katrina disaster area the
election to use your 2004 earned income to figure your 2005
EIC and additional child tax credit is not available;
o Resident of AZ, GA, MI, or NC and want to e-file your
state return, your state return must be able to fit within a
state forms and schedule;
o Must have a bank (or other financial) account to receive
refund.
FREETAXRETURN.com
Free File Criteria
FREE FEDERAL RETURN IF AGI is between $10,000 and $50,000
Other Services/Costs
o Federal - $9.95
o Free filing of extensions
o Customer service - $1.95 per question
o Tax Pro - $5.95 per question
o Live Chat Support - $29.95 unlimited use
o No mention of State returns (On 2/10 website indicated that
starting 2/15 you could prepare your state return for only
$7.95 - all mention of state returns was gone by 3/10)
o If return is rejected you get one free resubmission - after
that it is $3.95 per resubmission.
Payment option/ Refund services
PAY SITE:
o Credit card (Visa, MasterCard, American Express)
o Debit card (with Visa or MasterCard logo)
PAY IRS:
o Send payment in by mail
o Electronic payment (direct debit)
Notes
FORMS:
1040, 1040A, 1040EZ, W-2, 1099G, 1099INT, 1099DIV, 1099R, 1098, SSA-
1099, Sch. 1, 2, A, B, C-EZ, EIC, SE, 2441, 8812, 8863, 8453-OL
o State only returns unsupported
o Decedent returns unsupported
o Non-resident alien returns unsupported
o Foreign address returns unsupported
o Paid preparer unsupported
o Tax Exempt Interest unsupported
o IRA Contributions unsupported
o Estimated Tax Penalty unsupported
o Alimony Received unsupported
o Self-employed SEP, SIMPLE, and qualified plans unsupported
o Self-employed health insurance unsupported
o Alimony paid unsupported
o Gifts by cash or check over $500 unsupported
o Gifts other than by cash or check over $250 unsupported
o Foreign income or interests unsupported
o Under age 14 unsupported
Site does not offer phone or email support.
TaxEngine.com
Free File Criteria
FREE FEDERAL RETURN IF AGI is between $10,000 and $50,000
Other Services/Costs
o Free State returns for following: AL, AZ, GA, IA, ID, KY, MA,
MI, MN, MS, MO, MT, NY, NC, ND, OK, OR, VT, WV
o All other states - $10 ea.
o Nonqualifying customers appear to have a free option but you
can only view and print DRAFT copies of federal and state
returns.
o Free services plus prepare and print FINAL federal OR state
return and e-file your federal OR state return - $19.95
o Free services plus prepare, print, and efile FINAL federal AND
state returns - $29.95
o Five year storage - $10.00
o Print and mail tax return - $10.00
Payment option/ Refund services
o Page does not indicate payment method or refund information
o RALs and Refund Transfers offered through Santa Barbara Bank
and Trust. Found under privacy link, Bank Products heading. No
prices or fees listed.
Bank Products
If a user requests a "Bank Product" such as a Refund Anticipation
Loan (RAL) or Refund Transfer (RT). We share necessary information
with Santa Barbara Bank and Trust in order for the user's request to
be filled.
Notes
Forms offered: 1040 / 1040A / 1040EZ / 1040ES / 1040X / W-2 / W-2G /
1045 / 1099G / 1099MISC / 1099R / 1116 / 1310 / 2106 / 2106EZ / 2120
/ 2210 / 2441 / 2555 / 3468 / 3800 / 3903 / 4136 / 4137 / 4255 / 4562
/ 4684 / 4797 / 4835 / 4952 / 4972 / 5329 / 5884 / 5884A / 6198 /
6251 / 6252 / 6765 / 6781 / 8271 / 8283 / 8379 / 8396 / 8586 / 8606 /
8611 / 8615 / 8814 /8815 / 8824 /8826 / 8828 / 8829 / 8839 / 8846 /
8853 / 8862 / 8863 / 8880 / 8889 / 8903 / 8914 / 8915 / 9465/ Sch.
A / B / C / D / EIC / F / H / J / K-1 / R / SE / Sale of home
worksheet
o Titles of forms are listed.
o Home page says all tax forms are available. However, the list
above is not all tax forms.
o All states are available
o "Fanatical customer support" provided at no charge
o Link provided to become an affiliate (post a link to your
website to taxengine.com and you will get a minimum of $5.00
per return that was completed that came from you website).
Electronic Filing: Free File
The Free File Alliance, a joint effort by the IRS and tax software providers, just kicked off its fourth year. The program was begun in an effort to encourage taxpayers to electronically file tax returns. Last year, around 17 million taxpayers did their taxes using a computer and e-filed them. More than 5 million of those returns came in through the "Free File" program. Last year, however, the option to file for free through the IRS website was open to all taxpayers without restrictions.
On Oct. 29, 2005, the Free File Alliance and the IRS agreed to a memorandum of understanding (the 2005 IRS Agreement) to amend and extend the original free file agreement for an additional 4 years. Under the 2005 IRS Agreement, each member must make its Services available, on a non-discriminatory basis, to not less than 10% and not more than 50% of the individual taxpayer population. For the current tax year, the Alliance provides services only to taxpayers with adjusted gross incomes of $50,000 or less. A spokeswoman for one of the software providers in the Free File Alliance was quoted as saying that the primary reason to limit eligibility this year "was to restore Free File to its original philanthropic mission and intent." For the 2005 filing season, the Free File Alliance consists of 20 different software programs. Set forth below are some of the obstacles presented by the current Free File Alliance system.
Eligibility requirements vary greatly among the providers and are dependent on such things as AGI, which state you live in, how old you are, whether you are on active military duty, and whether you are eligible to claim the EIC. The IRS website (www.irs.gov) attempts to guide taxpayers to a service by asking you questions related to the various eligibility criteria. What is not taken into consideration by the IRS website in determining which free file company a person should use, however, is the type of income, deductions, and credits a person is eligible to claim. Most of the companies have limited forms that are available in their free file system and may not offer all, or any, state returns. For example, one company (EZTaxReturn.com) lists only 12 Federal forms being supported and this includes Forms W-2, W-2G, and 1099-R. It also includes limitations on some of these forms. For instance, even though the site supports the form for the dependent care credit, there is a limitation on that form so that if your spouse earned no income because he or she was a student or was disabled, you may qualify for the dependent care credit, but the site cannot help you claim it. The company offers three solutions for accessing forms that it does not support in its Free File program: (1) the company will sell you software that includes four additional forms and an interview format for $19.95; (2) the company will connect you via a weblink to "Formsend.com" that will email, download, or fax you a form or instruction for a delivery charge of $2.99 per form or instruction, or (3) for more complex returns, the company refers you via weblink to H&R Block's webpage so that H&R Block can prepare and e-file your federal return for a starting cost of $29.95.
Although the Free File service is marketed as free, the provider often subjects taxpayers to additional charges for very basic services late in the process. These services include resetting of passwords, printing and mailing services, preparing amended returns, and fees for payment by credit card. In addition, the Free File Alliance software providers market additional fee-based services for its users such as state return preparation and filing fees ($0 to $24.95), professional tax return review ($29.95 to $49.95), audit protection ($29.88 to $47.95), live chat help ($19.95 to $29.95), telephone technical support ($29.95 per return or $15 per call), per question consultation with a tax professional ($5.95 to $14.88 per question); vault service ($9.95 to $10 for 5 years); and credit chargeback ($29 to $35). Free File Alliance providers also offer refund anticipation loans with costs ranging from $19.95-$104.95 in addition to proposed finance chargers or interest rates ranging from 31% - 227% APR plus possible late fees. Taxpayers receiving a refund may also get offers to deduct fees from the refund, to receive prepaid debit cards with numerous transactional charges, or to purchase other retail gift cards with shipping and handling fees.
Free File Alliance providers also offer other more tangential services. One website provides a link to an international barter exchange that offers to bring the taxpayer at least $1,000 in new business during the first 12 months of business with their exchange or the company will refund an initial membership fee (enrollment fee is $25 + a 3-4% fee on each exchange + a $15.00 monthly accounting fee). The same Free File provider has another link for tax preparation franchise opportunities in which the taxpayer can be paid between $40 and $60 per tax return generated for the vendor. The website advertises that "ONLY THE SKY LIMITS YOUR POTENTIAL". The company offers to provide banners, signs, start-up kits, and unlimited opportunity. Franchise ownership costs $15,500; tax operator costs $495; FaxTax costs as low as $199.
DOCUMENT ATTRIBUTES
- AuthorsGrassley, Sen. Chuck
- Institutional AuthorsSenateFinance Committee
- Subject Area/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2006-7251
- Tax Analysts Electronic Citation2006 TNT 73-14
