60 percent of taxpayers eligible for free e-file

Most taxpayers are eligible to use the IRS’ free tax preparation and electronic filing program, the agency announced today.

The IRS relaunched its Free File Web site, at www.irs.gov, where taxpayers can check their eligibility to use the free software. The agency said it hopes the site’s improvements will attract more users.

The Free File program is a pact between the IRS and 16 tax software companies, among them CCH Inc. of Riverwoods, Ill., H&R Block of Kansas City, Mo., and Intuit Inc. of Mountain View, Calif., that make up the Free File Alliance.

The alliance provides software free for tax preparation and e-filing to at least 60 percent of all taxpayers, or about 78 million who file individual tax returns. Each software company sets its own eligibility requirements, which include income, age, state or military service.

Low-income users, such as individuals who file 1040EZ returns or families who claim the Earned Income Tax Credit, are the program’s chief targets, said IRS commissioner Mark Everson.

“Free File is an easy, fast and secure way for citizens to file taxes, and to get refunds in half the time,” said Treasury secretary John Snow at the briefing. To add further incentive for e-filers, President Bush has requested in his fiscal 2005 budget to extend the April filing deadline for electronic returns by 15 days.

Last year, 53 million of 131 million taxpayers e-filed. Of those, 2.8 million used IRS’ Free File. And 83 percent of those who used Free File earned income of $32,000 or less, said Mike Cavanagh, executive director of the alliance.

IRS and the companies simplified the Free File program, said Terry Lutes, the IRS associate chief for Information Technology Services. The IRS Web site provides instructions, frequently asked questions and links to the Free File Alliance. Last year, some filers were confused when they were shifted to a commercial site, but the site now tells users that they are still with the IRS Free File program.

The companies have displayed their eligibility requirements, products and tax forms they support more prominently on their site, Lutes said. The software will tell the user when the tax preparation process is finished and total the cost, if there is any. “Sometime you don’t know your true income until you finish your tax return,” Lutes said. If there is a cost, the user has the option to continue and pay the fee to file or not file. “No one is required to buy any products,” he said.

The vendors transmit electronically filed returns to the IRS via secure telephone lines. The company then sends an acknowledgment file, notifying the taxpayer whether the return has been either accepted or rejected.

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