The IRS has been trying to increase the use of electronic filing for some time, saying it saves money and is less error-prone. But tax software companies havethat a government-sponsored program will hurt their businesses; companies typically charge an average of $12 to file taxpayers' returns electronically.
In October, the IRS reached a deal with the Free File Alliance, a consortium of companies including Intuit, to cooperate on the free filing plan.
The IRS hopes to get 80 percent of federal tax returns filed electronically by 2007. Last year, 47 million individual returns, or about 36 percent of the total, were filed electronically.
"Simply paying taxes is burden enough without the extra costs in time and professional help that too many Americans have endured until now," Mitchell E. Daniels Jr., director of the U.S. Office of Management and Budget, said in a release. "The advent of free, fast filing for a substantial majority of taxpayers marks a great breakthrough for the president's agenda to make the federal government put the needs of the citizen first."
A new IRS Web site, as well as the FirstGov site, will connect people to various companies that offer both free preparation and free filing for eligible taxpayers. Seventeen plans are featured on the site, including ones from Intuit and H&R Block.
Eligibility will vary among the companies, although many offers are targeted at low-income filers. Requirements will generally be based on factors such as age, adjusted gross income, state residency, military status or eligibility to file a Form 1040EZ or use the Earned Income Tax Credit.
"We're proud to say we've been doing this for a while," said Scott Gulbransen, an Intuit spokesman. "For us, it's nothing new. The only thing we have done in cooperation with the IRS was raise our limit."
Intuit had been offering free filing for taxpayers with an adjusted gross income of $25,000 or lower. That figure has been raised to $27,000, he said.