Tax prep firms can collaborate
- By William Matthews
- Oct 09, 2002
Electronic tax preparation companies can collaborate on a project to offer
free online services to lower-income taxpayers, the Justice Department has
said.
Companies, including well-known Intuit Inc. and H&R Block and lesser-known
rivals such as Free1040taxreturns.com, are allowed to form a consortium
to offer free tax preparation services without fear of violating antitrust
laws, said Charles James, chief of Justice's antitrust divisi
The consortium
was proposed in an agreement reached this summer between tax preparers and
the Internal Revenue Service. The tax companies agreed to provide free tax
filing services to millions of taxpayers, and in return, the IRS promised
to stay out of the online tax preparation business.
James said the consortium appears to "pose no threat to competition
in the market for providing tax services to individuals."
And he called the agreement between the companies and the IRS an "innovative
public/private partnership" that promises to let taxpayers "take advantage
of simple, speedy options for electronic filing of their returns."
A key job for the consortium is to create a Web page that lists participating
tax preparers' free services and provides links to them. The Web page will
be available on the IRS Web site (www.irs.gov). Acting
with the IRS, the consortium is also expected to promote the free tax services.
The IRS is anxious to increase the use of electronic tax filing. The
tax agency hopes 80 percent of taxpayers will file electronically by 2007.
That many e-filers, the IRS calculates, could cut tax return processing
costs by as much as $243 million.
Electronic filing helps cut the cost of handling, storing and keeping
track of tax records. Electronic tax forms also contain far fewer errors
than their paper counterparts, which reduces the cost of processing them.
More than 45 million taxpayers filed electronically last April, and
the IRS says as many as 78 million taxpayers are expected to be eligible
for the free e-filing services to be provided by the tax preparers.
At least nine companies now offer free tax filing services, and each
has a link and a brief description in the e-filing section of the IRS Web
site. Some offer the service only to those who make less than $15,000 a
year, others set the cutoff at $25,000. Intuit, which makes TurboTax software,
recently raised its eligibility level to include those who make up to $27,000
a year, Intuit spokesman Scott Gulbransen said.
E-filing is particularly beneficial for taxpayers in that income range,
he said. More than 60 percent are entitled to refunds, and "they get their
money back faster — as fast as five or six days" if they file electronically
and opt for a direct deposit refund, he said.