You’d think that “free” is good, but this joint IRS-private sector venture has been buffeted by critics ever since its inception in 2003.

Many folks within and outside of the IRS have been questioning many things about this initiative.  Should IRS be partnering with private tax software companies who’d rather have customer pay for services, lest they go bankrupt?  Are the taxpayers being served or exploited?  How many sales pitches should taxpayers be exposed to while they are trying to electronically file tax returns at no charge?

From the industry’s point of view, when this initiative first hit the streets, they were up in arms.  Businesses are in business to make money. 

A little historical perspective would be helpful.  Several years ago, many in the U.S. government felt that IRS should develop and offer free electronic tax return for the public.  This, of course, would represent a huge departure in U.S. (Executive Branch) policy.  The government would essentially be competing directly with existing services developed and offered by the private sector.

Needless to day, tax software companies were not too thrilled with the prospect of a multi-billion dollar industry potentially drying up and blowing away.  Industry interests successfully lobbied to kill a free government-developed software option; however, in the process, they had to agree to give something up in return.  As a result, an uneasy truce was forged, and companies agreed to offer “Free File” to American taxpayers.

[Interestingly, years before this evolved, Intuit, a California-based tax software company, had offered free electronic tax return filing to people with incomes of $25,000 or less.  This was part of the company’s own philantrophic proclivilties, and may have played as big a role as anything else in ultimately creating “Free File” and pressuring other companies to join in.  After all, it could be argued, if one company was providing such service on its own, why couldn’t others?]

Daniel Pulliam’s October 26, 2006, article in Govexec.com provides a good summary of the policy – and political – issues surrounding this seemingly wonderful means to help taxpayers fulfill their civic duty of filing and paying federal income tax.

How expansive should such an effort be?  Should for-profit companies be allowed to entice those using a free filing service to choose some other ‘for-fee’ goods or services?  Should only lower-income taxpayers benefit, or should it be available to the likes of Warren Buffet and Bill Gates?

Have you used “Free File” for filing your federal income tax return?  If so, what was your experience, and what do you believe the future of such service should be?

Fred Apelquist, contributing editor

Comment RSS - Trackback URI