There’s no question that the Free File program, the Internal Revenue Service’s partnership with the manufacturers of tax prep software, is a win-win deal on many fronts for both parties.In exchange for the manufacturers in the Free File Coalition making free filing offers to taxpayers on the basis of such factors as income (in 2007, taxpayers making less than $52,000 a year get access), the IRS has agreed not to offer taxpayers its own free alternative. The program, which includes participation from electronic prep heavyweights Intuit and H&R Block, is now in its fifth year.
But it was a fairly big deal when the IRS announced last week that all of the manufacturers in the coalition could no longer go about business as usual -- and that they had agreed to stop upselling ancillary services to taxpayers who used the Free File portal after quiet negotiations. The major change in the program for 2007 will limit the marketing of products such as refund anticipation loans. RALs have become the target of consumer groups in recent years, who complain that the loans, essentially an advance on a taxpayer's tax refund, carry exorbitant interest rates over the short-term.
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