The Free File Alliance has sent a letter to the Senate Finance Committee, expressing concerns about a proposed government-funded Web portal that the alliance says is aimed at eventually providing tax preparation and e-filing services.
While Congress has yet to officially announce any proposal, in its May 23 letter, the alliance, a coalition of private-sector tax preparation software companies, says that rumor has it that the committee may consider the creation of such a portal in the coming weeks.
The alliance was established as part of the Internal Revenue Service’s Free File Program in 2003. In exchange for providing free online tax return preparation and filing services through the IRS Web site, the agency agreed that it would not pursue the creation of its own online tax prep offering.
In October 2005, the IRS and the alliance renegotiated the agreement to continue the program through 2009, but with several key changes, including a "means test" that limited eligibility for the no-cost online filing services to taxpayers with an adjusted gross income of $50,000 or less. The new income ceiling eliminated some 39 million U.S. taxpayers from eligibility for these services, and participation in the program plunged by almost 23 percent during the 2006 filing season.
Alliance executive director Tim Hugo writes in the letter that if Congress were to enact the Web portal proposal, it would void the group’s current agreement with the IRS.
“Instead of trying to supplant the private sector, take on a massive new set of costs and systems that will be borne ultimately by the taxpayers to implement, maintain and service, and effectively throw out one of the most successful public-private partnerships in existence, why not simply invest more in advertising the existing Free File program,” Hugo asked, in the letter.
A recent report from the Government Accountability Office concluded that state-operated “portal systems” were not successful when measure by financial terms, nor by rate of taxpayer use.
