Government Computer News
Pressures for improved, broader free e-file buffet IRS
Congress and auditors have criticized the IRS for insufficient oversight of industry that provides free electronic tax filing for a segment of the population. Some members of Congress and tax experts say the IRS should develop its own portal to provide free electronic filing and make it available for all individuals. Yet others question whether the federal government should prepare and collect taxes.
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The IRS has relied upon the tax preparation software industry to provide that service under the Free File Alliance for those who fit industry’s income or other criteria. IRS and industry renegotiated that contract for use through 2009 with more eligibility restrictions than previously.
“If the tax preparation industry cannot provide free basic filing services without hidden costs and traps, perhaps it is time to consider having the IRS provide a direct filing portal to enable all taxpayers to file electronically without cost,” said Senate Finance chairman Charles Grassley (R-Iowa) and Senate Finance Ranking Member Max Baucus (D-Mont.) in a letter last week to IRS commissioner Mark Everson.
The Senate Finance Committee, which oversees the IRS, reprimanded Everson for accepting tighter program income limitations, which eliminated 39 million taxpayers from program eligibility. At the same time, the agency eliminated the TeleFile program, which provided free electronic filing directly with the IRS by phone for certain eligible taxpayers.
“It seems the tax preparation industry was holding all the cards in the renegotiation of this program,” said Grassley, adding that industry participants used the Free File program to market an array of other products to boost revenue at taxpayer expense.
The senators cited a report from the Treasury Inspector General for Tax Administration that examined the eligibility restrictions, which caused a 23 percent drop between 2005 and 2006 in taxpayer usage and other shortcomings. The IRS told TIGTA that the Free File Alliance never guaranteed universal coverage, only up to 60 percent, although some industry participants have made their services available to all.
The Free File Web page also can be difficult and confusing for some taxpayers to use, TIGTA said. In a survey of Free File users, however, the agency found a high level of satisfaction in its ease of use and navigation, it said.
TIGTA noted that Free File industry participants added consumer protections, security and performance standards, such as limiting offers on refund anticipation loans, but that the commercial nature of the Free File program made those enhancements necessary.
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