Tax software vendors Intuit and H&R Block were hit with a potential multi-billion-dollar class-action lawsuit alleging that they charge excessive fees for electronic filing.

A Philadelphia law firm, Feldman Shepherd Wohlgelernter Tanner & Weinstock, along with another Pennsylvania firm, Cooley & Handy, filed the suit this week on behalf of a Philadelphia resident, Stacie Byers. The suit claims that Intuit, Block and other members of the Free File Alliance unlawfully charged millions of U.S. taxpayers excessive e-filing fees. The firm estimates the damages in the billions of dollars.

The Free File Alliance is a coalition of 20 private sector tax preparation software companies that has an agreement with the Internal Revenue Service to provide free service to millions of American taxpayers, especially the economically disadvantaged. On its Web site, the alliance claims that 15.4 million returns have been e-filed through Free File since 2003. The alliance estimates that 70 percent of all taxpayers, or 95 million Americans, are eligible for Free File.

Nevertheless, the attorneys claim the tax software vendors have used the Free File arrangement to sell commercial products. "This amounts to a tax on e-filing tax returns," said Feldman Shepherd partner Thomas More Marrone in a statement. "This is government outsourcing at its worst."

The class action seeks a full refund of all fees paid for e-filing along with injunctive relief. Intuit spokesperson Julie Miller said the company believes the claim is wholly without merit.

"The IRS Free File program is a pro-consumer, public service program where the government and the software industry work together to make free federal online tax preparation and e-filing services available to 95 million eligible U.S. taxpayers of low to moderate income," she said in an e-mailed statement. "There are no fees for federal tax preparation and e-filing services through the Free File program, nor is marketing or cross-selling of other things permitted."

Since online tax services are donated, neither the Treasury nor the taxpayer pay for the Free File program, she added. Block and the Free File Alliance did not respond to requests for comment.

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