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Low-income tax filers get a break on Web

As April 15 approaches, firms that offer online tax services are setting their sights on low-income filers.

As April 15 approaches, firms that offer online tax preparation and filing are setting their sights on low-income filers, luring them onto the Web with free offers.

Intuit and H&R Block are offering free services either to low-income filers or those with simple tax returns. Intuit's Quicken Tax Freedom Project promises a free Web filing for individuals and families whose income is $20,000 per year or less. And H&R Block will file a 1040EZ free of charge over the Web.

The 1040EZ form is designed for individuals with income below $50,000 who do not claim dependents or itemize deductions. About 25 million Americans qualify to file that form every year, according to H&R Block.

Intuit describes its free filing program as a charitable gesture made in response to the government's call to improve online commercial access for all Americans.

At least 50 million tax filers, or 43 percent of all individual income tax returns, will be eligible for the program, according to Intuit. The program expires April 1.

The number of low-income Net users is growing: About 23 percent of adults who went online last year had household incomes below $30,000 a year, compared to 16 percent of experienced Net users, according to the Pew Research Center. But Net demographic data still skews in favor of high-income earners, so the number of Americans who make less than $20,000 per year and have access to the Web may be composed largely of college students. And those filers are not likely to qualify for the free offers for long.

The firms hope those who file for free using a particular service will stick with it once they graduate to more complicated forms that they have to pay for.

H&R Block doesn't make any bones about its motivations in giving away the 1040EZ service.

"Our goal is to win over customers," said Gene Goldenberg, vice president and publisher of H&R Block's financial software division. "When users file more complicated returns, when they have children, buy a house, have interest or dividend income, and have to file more complicated returns, hopefully they will think of us."

H&R Block has modest expectations for Web tax filing, at least in the near term. Its TaxCut software lets users file electronically over phone lines, but the information does not reside on a Web server.

"We don't see online tax preparation and filing as something whose time has quite yet come," Goldenberg said. "All of our research shows that there is still considerable resistance to putting all of your tax data on the World Wide Web and storing it on someone else's server. It's one thing if your business is to style yourself as an Internet-based company, but the proof is in the actual number of people who do it."

Goldenberg predicted that this number would be less than 10 percent this year.