IRS asks Intuit, others to expand Free File program

Recently we reported that the Treasury Inspector General for Tax Administration (TIGTA) discovered that, while the majority of taxpayers who request refund anticipation loans as rapid payment of tax refunds would qualify for free tax preparation through the IRS's Free File service, most of those taxpayers were unaware of the service ("IRS encouraged to market free tax services to RAL recipients").

TIGTA recommended that the IRS improve its marketing and be more aggressive in trying to reach taxpayers who qualify for the free service.

Meanwhile, the IRS has contacted the tax preparation software companies that participate in the Free File Alliance by offering their federal income tax preparation services at no charge to qualifying taxpayers through links on the IRS Web site and has asked that they allow all taxpayers to file their federal tax returns for free. Currently the members of the Free File Alliance place limitations on who is allowed to use the free service, only offering the free service to taxpayers with income that doesn't exceed $54,000.

Intuit, maker of TurboTax software, in a letter sent to Senator Charles Shumer (D-NY), has indicated that such a change "can be realized for the coming 2009 tax season," but no definitive agreement has yet been reached, according to Julie Miller, spokesperson for Intuit.

"We are a member of the Free File Alliance and FFA is currently in discussions with IRS about proposed changes to the Free File program for the coming tax season," Miller said.

Liberty Tax Service, maker of eSmartTax, has indicated it will continue to participate in the Free File Alliance and notes that it already allows free federal tax electronic filing for taxpayers of all income levels on its Web site. John Hewitt, CEO of Liberty Tax Service, said, "We think it's a great idea. As long as the IRS will permit that, we will gladly oblige them." Liberty plans to continue to charge a fee for state income tax filing.

"This is a huge victory that we've been seeking for a long time," said Senator Charles Shumer (D-NY), chairman of the Joint Economic Committee, in an interview with The Wall Street Journal. "At last, taxpayers will be able to file with ease and without expense."

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