OnlineTax Returns – File Them for Free?

The Internal Revenue Service has struck a new deal with an alliance of tax preparers and software publishers that will allow up to 78 million Americans to file their tax returns electronically without charge. Tax preparers such as H&R Block usually charge taxpayers a fee for online filing in addition to charges for the actual tax return preparation.

According to the IRS , the average online filing fee is $12.50. Under the terms of the agreement between the government and the Free File Alliance, tax preparers and other filing services that are members of the alliance must provide free online filing services to at least 10 percent of their customers.

In return, members of the alliance will be promoted on an IRS website that will provide taxpayers links to the free services.

“This represents an important step forward for taxpayers and our e-filing efforts. This will give millions of taxpayers free access to preparation and e-filing,” IRS Commissioner Charles O. Rossotti said.

The IRS anticipates the participating companies will provide a much higher percentage of free online filings than the required 10 percent threshold. The incentive? The more companies offer free online filings, the less inclined the IRS will be not to compete with alliance members by offering its own service.

The IRS said the 2002 goal is for 60 percent of tax returns to be filed for free. Last year, 46.5 million tax returns out of 125.6 million were filed electronically.