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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, October 25, 2005

IRS Signs 4-Year Deal with Intuit, H&R Block: Companies to Provide Free Electronic Filing, IRS to Stay Out of Tax Software Market

IR-2005-126IRS and Free File Alliance Reach Agreement:

The IRS and the Free File Alliance today announced agreement to renew their partnership, extending free tax services and electronic filing to an eligible 93 million taxpayers and providing important new consumer protections. This year, the Free File program served more than 5 million taxpayers with free tax software and IRS e-file.

The pact – an innovative public-private arrangement – will mean enhanced services to taxpayers, improved disclosure regarding refund anticipation loans and greater assurances of privacy protection. Free File made its debut during the 2003 filing season as a way to provide free services to moderate and low-income taxpayers.  We think this is a constructive step forward. It allows Free File to continue to grow, but it also contains important new consumer protections," said Mark W. Everson, IRS Commissioner.  Free File is an easy, fast and secure way for citizens to file taxes and will also allow Americans to get refunds in half the time.

As part of the agreement, the IRS provides to taxpayers a listing of the Alliance members via the Free File web page, which is hosted on The Free File Alliance members are a consortium of tax software manufacturers that set their own criteria for taxpayer eligibility for free use of their software. The agreement calls for services to be provided to 70 percent of the nation’s taxpayers. Taxpayers access Free File through Alliance members and their services will be available beginning in January 2006 on the IRS Web site.

The new agreement includes the following:

• Alliance members who offer refund anticipation loans (RALs) will provide the highest standards of consumer protection upholding greater disclosure and consent  requirements related to ancillary financial products  i.e.,  fees and interest rates, information on other options for refunds, and full disclosure of RALs as loans rather than refunds;
• Alliance members will provide additional tax forms such as Form 4868 that allows for extensions to file;
• Alliance members’ Web sites will display whether state online tax preparation and filing services are available and the associated fees, if any.
• This program will extend the benefits of on-line federal tax preparation and electronic filing to the taxpayers least able to afford e-filing their returns on their own.

From Bloomberg (by Ryan J. Donmoyer):  Intuit, H&R Block Offer Free Tax Filing to 93 Mlllion

Intuit Inc., H&R Block Inc., and 18 other companies that sell tax return preparation services agreed to offer free electronic filing to as many as 93 million taxpayers in a four-year agreement that keeps the IRS out of the tax software market.

The agreement makes taxpayers with adjusted gross incomes of less than $49,600 eligible for free filing services from the companies, which qualifies about 70 percent of the taxpaying public. About 5.1 million tax returns were filed for free under the program last year.

Intuit has sought the agreement in part because it places limits on the strategy of some rivals of offering free filing to all customers while profiting from selling short-term tax refund loans with high interest rates and other auxiliary products. The agreement also prevents the IRS from developing its own free tax- filing systems and making them available to the public.

The Internal Revenue Services said the agreement would help the agency meet a congressional mandate to have 80 percent of all tax returns filed electronically by 2007. It would also impose new consumer protections for taxpayers enticed by the short-term refund loans that carry high fees, IRS Commissioner Mark Everson said in a statement....

The companies ended their negotiations with the tax collector two days after Mountain View, California-based Intuit, the world's biggest maker of tax-preparation software, won a legislative victory when the U.S. Senate voted to ban the IRS from developing its own products to help taxpayers file electronic returns.

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Thanks to the TaxProf Blog for the heads up. The IRS and the Free File Alliance have extended their agreement for another 4 years. In exchange for being included in this program, the software companies agree to behave better in [Read More]

Tracked on Oct 26, 2005 7:23:01 AM