The Senate Finance Committee didn't like what it found in investigating ancillary offers often made as part of using the Internal Revenue Service's Free File online tax return preparation services.

While taxpayers don't have any obligation to buy goods and services marketed on the sites -- and in fact, the IRS notes that Free File users should be sure to read the fine print -- many of the 20 private vendors participating in the Free File Alliance routinely offer users expensive add-on services ranging from tax advice and refund anticipation loans, to franchise opportunities and other marketing pitches.

The study "indicates that use of the Free File programs may be anything but free," Finance Committee Chairman Charles E. Grassley, R-Iowa, wrote in a letter to IRS Commissioner Mark W. Everson. Grassley also asked the IRS to explore what it would take to provide a direct filing portal allowing all taxpayers to file for free using the IRS Web site.Now in its fourth year, Free File was open to all taxpayers last year, when more than 5 million returns were filed through the site. This year, eligibility is limited to the 93 million individual taxpayers with adjusted gross incomes of $50,000 or less. The agency -- which has just three of its own employees dedicated to the Free File program -- and the Free File Alliance agreed last fall to extend the program for four more years.

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