Free Online Electronic Tax Filing Agreement Questions And Answers

What services does the Agreement offer?

Through a partnership between the IRS and the tax software industry (i.e., Free File Alliance, LLC), taxpayers will be able to access free, online tax preparation and electronic filing services on the Internet via irs.gov or firstgov.gov. Eligible taxpayers will be able to prepare and file their personal income tax returns using the software provided by the Free File Alliance member companies.

Why was the Free File Alliance formed?

In November of 2001, OMB established through its Quicksilver Task Force, 24 e-government initiatives that are part of the President's Management Agenda. These initiatives were designed to improve Government to Government, Government to Business, and Government to Citizen electronic capabilities. One initiative, EZ Tax Filing, instructed the IRS to provide free online tax return preparation and filing services to taxpayers. In accordance with this OMB directive, the IRS began working in partnership with the tax software industry to develop a solution. The result was the formation of the Free File Alliance, LLC, a group of tax software companies, managed by the Council for the Electronic Revenue Communication Advancement (CERCA), who will provide free online tax preparation and electronic filing services to a significant number of taxpayers. These free services, accessible through irs.gov or firstgov.gov, will be available to eligible taxpayers as early as January 2003.

Why is the government doing this through a partnership with private industry rather than providing its own software free to the public?

The government believes that private industry, given its established expertise and experience in the field of electronic tax preparation, has a proven track record in providing the best technology and service available. The Secretary of the Treasury has stated that he did not want the IRS to go into the software business. We believe that the partnership of the IRS with private industry will provide taxpayers with higher quality services by using the existing expertise of the private sector, maximizing consumer choice, promoting competition in the marketplace, and meeting these objectives in the least costly manner to taxpayers.

What are the benefits to the taxpayer?

The benefits of using these free services are similar to those of e-filing, with some additions:

• Reduced tax return preparation time;
• Faster refunds in keeping with the current IRS e-filing capabilities;
• The covered taxpayers will receive services by choosing between a series of commercially available services, at no cost;
• IRS promotion of the Free File Alliance’s free services may reduce taxpayer fears about transmitting tax data to third parties; and
• The benefits of e-filing may be introduced to taxpayer segments who have not yet been exposed to this capability.

Some private sector firms have offered free e-filing to select taxpayer groups for several years; how is this approach different?

• This approach offers a multi-year agreement between the IRS and the Free File Alliance to provide these free service(s) to more taxpayers. Previously, free offerings were not consistently available, were subject to modification or discontinuation from year to year, and were not widely publicized.
• Taxpayers will have easier access to the free services web page (hosted on irs.gov and linked from firstgov.gov), which will provide a listing of all free offerings in a single location.
• Alliance members will offer both free preparation and e-filing services – there will be no cost to the taxpayer. Previously, some companies charged for preparation (filling of forms and tax calculations) while offering the transmission free, or provided the preparation free while charging for transmission, or some variation thereof. Under the Agreement, both are free to eligible taxpayers.

Which taxpayers will be eligible to use these free services?

The Free File Alliance will offer free services to certain taxpayers, consistent with the offerings of the member companies. In the aggregate, these offerings are expected to be available to at least 60% of all individual taxpayers. At this point in time, the IRS is unable to elaborate on which taxpayers will be covered. However, it is expected that many prospective Alliance members will provide free online tax preparation and electronic filing to taxpayers below certain income levels; others may provide free preparation and filing to different groups of taxpayers.

Is this Internet filing?

The free services will be provided via the Internet; taxpayers will enter data and perform calculations online. Tax returns will be sent electronically from the provider to the IRS.

How will Taxpayers' security and privacy be protected?

• Tax return preparation will be accomplished via proprietary commercial systems that have been approved by the IRS; transmittal will be through the established IRS e-file system.
• Each participating company must attain a third party privacy and security certification.
• Participants must comply with all federal rules and regulations on taxpayer privacy.
  

Will it get me refunds quicker?

Refunds will be processed via the existing e-file system; in most cases, refunds will be issued in half the time of tax returns mailed to the IRS.