A Wired IRS Embraces the Net

Let’s see, you’re barely over that holiday hangover when what to your wondering eyes does appear but an envelope from the Internal Revenue Service, kicking off the filing season.

But this year more than ever the IRS – dare we call it the e-IRS – has expanded its free, online filing options, and is even touting reduced tax rates, more deductions and fewer forms to file.

Last year, a record 47 million tax returns were filed through IRS e-file, and the agency hopes to bring that to about 54 million this year.

“This is the first year where you can do almost everything online at IRS.gov,” IRS spokeswoman Nancy Mathis was quoted as saying.

That’s in part because the IRS has struck a deal with an alliance of tax preparers and software publishers (the Free File Alliance) that it says will allow more than 60 percent of Americans to file their tax returns electronically without charge.

The tax collection agency likes to get a head start on April 15 and already has begun mailing out 38 million tax packages and 25 million electronic-filing brochures.

This year’s filing season is expected to see about 132 million returns filed, including 54 million filed electronically.

Among the key changes being introduced for the 2003 filing season is a provision to let
taxpayers check on the status of their refund by visiting the “Where’s My Refund” section on www.IRS.gov. And if that sounds a little like the “Where’s my stuff” links on Amazon.com, well, nothing succeeds like success.

The government says that for the first time, more than 60 percent of all taxpayers will be able to prepare and electronically file tax returns for free on the Internet. The IRS Free File program, offered through private-sector partners, will be available beginning in mid-January at the IRS site.

“The IRS.gov Web site already is one of the busiest in the world,” said IRS Acting Commissioner Bob Wenzel. “We urge taxpayers to give it a try this year. They will find it helpful and easy to use.”

According to the IRS, the average online filing fee is $12.50. Under the terms of the agreement between the government and the Free File Alliance, tax preparers and other filing services that are members of the alliance must provide free online filing services to a portion of their customers. Of course, that doesn’t necessarily mean free tax return software or preparation services. Only free filing services are assured, but many companies apparently will work to aid lower-income filers.

Intuit’s TurboTax, for instance, which dominates the software market for self-preparers, reportedly plans free service for returns with adjusted gross income under $27,000, or slightly higher if the return claims a credit available to low-income workers.

The more companies offering free online filings, the less inclined the IRS will be not to compete with alliance members by offering its own service. In fact, the alliance delays for at least three years any move by the IRS to permit free, direct tax filing from its own Web site.

Each company in the alliance is allowed to set its own eligibility criteria. Officials declined to say how many firms had joined the consortium so far; more details are expected in mid-January.

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