IRS wants FREE e-filing

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Big Al
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IRS wants FREE e-filing

Post by Big Al » Thu Sep 18, 2008 5:19 pm

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The Internal Revenue Service has asked private, tax-software companies to find a way to let all taxpayers file their online forms at no extra charge. Currently, many people file electronically, but often must pay a fee to actually submit their forms.

The new effort was disclosed in a letter from Intuit Inc. to the office of Sen. Charles Schumer (D., N.Y.), chairman of the Joint Economic Committee, who has raised concerns about the fees.

IRS spokeswoman Michelle Eldridge on Sunday said the agency is in an "ongoing dialogue" with the Free File Alliance, a group of tax-software companies, including Intuit, that already provides free e-filing to taxpayers with incomes of $54,000 or less.

"We're exploring options for making the Free File Alliance available to as many taxpayers as possible," Ms. Eldridge said. She declined to provide further details.

From : http://online.wsj.com/article/SB122144153879934659.html

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nisiprius
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Post by nisiprius » Thu Sep 18, 2008 5:26 pm

In many cases, people appear to calculate their taxes on a computer and then print out the forms to mail to the IRS, possibly to avoid the extra fee.
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Last edited by nisiprius on Thu Sep 18, 2008 8:18 pm, edited 2 times in total.
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Greenewashed
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Re: IRS wants FREE e-filing

Post by Greenewashed » Thu Sep 18, 2008 6:48 pm

Big Al wrote:.
The Internal Revenue Service has asked private, tax-software companies to find a way to let all taxpayers file their online forms at no extra charge.
Expanded e-filing would be a cost savings to the IRS, so why should it fall on the private software companies?

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Re: IRS wants FREE e-filing

Post by sewall » Thu Sep 18, 2008 7:14 pm

Greenewashed wrote:Expanded e-filing would be a cost savings to the IRS, so why should it fall on the private software companies?
I admit I don't recall all the details but the e-file provisions of the code are written in such a way that only private companies can handle e-filing. It's a messed up system that benefits tax prep software companies, akin to ATM fees. How can automated electronic transactions cost more? They don't, but companies got it set up so they can make a dime (or $17+) per transaction. It's a legal scam and a damn shame that taxpayers can't help make the system more efficient without forking over a hefty fee.

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Post by mickeyd » Thu Sep 18, 2008 7:21 pm

There goes the guv'ment trying to eliminate one of my VG benefits. :shock: As a Flagship client I get TT for free anyway today.
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ElJay
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Re: IRS wants FREE e-filing

Post by ElJay » Thu Sep 18, 2008 8:15 pm

sewall wrote:I admit I don't recall all the details but the e-file provisions of the code are written in such a way that only private companies can handle e-filing.
Yeah e-filing is a non-starter for me until I can file directly with the IRS without any fees. I will continue with paper until they fix this dumb system used to subsidize the tax preparers.

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nisiprius
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Post by nisiprius » Thu Sep 18, 2008 8:19 pm

In many cases, people appear to calculate their taxes on a computer and then print out the forms to mail to the IRS, possibly to avoid the extra fee.
Oh, another reason I do it to avoid entrusting a third party with financial data that's nobody's business but mine and the IRS.

I have no idea how secure the IRS is, but adding another link to the chain isn't going to strengthen it.

Intuit, for example, experienced a big security breach in 2004, Credit risk for customers after firm's PCs stolen. That was bad enough, but it just happened again: Lost Computer Exposes Data of 22,000 at Intuit
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Post by Parthenon » Fri Sep 19, 2008 10:37 am

In 2003 while working on my daughter's income tax return with one of the members of the Free File Alliance, one of the screens came back with the information of an individual from Virginia, I was in Illinois. It had his name, social security number and other financial data. Basically it was his 1040 for that year. I don't know if he was actively working on filing at the moment or whether this information came back from archives. I had enough information to contact him and make him aware of the situation.

I also contacted the IRS and they got back to me so we could discuss the particulars of this serious violation of security.

My confidence in anyone maintaining security on the internet was and is diminished even today.

Ed
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Post by Sunny Sarkar » Fri Sep 19, 2008 10:55 am

If they are serious, the IRS could easily develop the software and make it available on irs.gov for John Q Taxpayer.

But imagine the amount of lobbying from the tax filing industry that will come in trying to stop the gov from killing this cash cow. In fact, I'm surprised that this dialog is even happening.

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Post by HueyLD » Fri Sep 19, 2008 11:43 am

Sunny wrote:If they are serious, the IRS could easily develop the software and make it available on irs.gov for John Q Taxpayer.

But imagine the amount of lobbying from the tax filing industry that will come in trying to stop the gov from killing this cash cow. In fact, I'm surprised that this dialog is even happening.
o.k., but we cannot have it both ways.

The IRS can certainly make their software available for any taxpayer, but do we want our government to be in the tax software business?

Most Bogleheads are more knowledgeable and better educated than the average John Q taxpayer. There are a lot of taxpayers out there who don't have a clue what AGI stands for, or any other words people on this board throw around like footballs.

If the gov. becomes the only player in providing tax software and tax prep. services, how many more people do we have to hire for the IRS? Does anyone ever notice that the IRS employees are not responsible for any advice they give you? Whom are you gonna sue if the gov. is the only player in town and your taxes are screwed up?

There is no way that for-profit companies will provide reliable free filing for all unless they get paid either directly, or indirectly.

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Post by Blackwood » Fri Sep 19, 2008 10:06 pm

HueyLD wrote:
Sunny wrote:If they are serious, the IRS could easily develop the software and make it available on irs.gov for John Q Taxpayer.

But imagine the amount of lobbying from the tax filing industry that will come in trying to stop the gov from killing this cash cow. In fact, I'm surprised that this dialog is even happening.
o.k., but we cannot have it both ways.

The IRS can certainly make their software available for any taxpayer, but do we want our government to be in the tax software business?

Most Bogleheads are more knowledgeable and better educated than the average John Q taxpayer. There are a lot of taxpayers out there who don't have a clue what AGI stands for, or any other words people on this board throw around like footballs.

If the gov. becomes the only player in providing tax software and tax prep. services, how many more people do we have to hire for the IRS? Does anyone ever notice that the IRS employees are not responsible for any advice they give you? Whom are you gonna sue if the gov. is the only player in town and your taxes are screwed up?

There is no way that for-profit companies will provide reliable free filing for all unless they get paid either directly, or indirectly.
But surely tax preparation and tax filing can be two different services. I agree that it is not a good idea for the IRS to try to create a competitor to Turbotax, but I don't see why they can't provide a free way to electronically file the numbers that make up the return.

They already provide downloadable PDF versions of forms that allow you to enter and save numbers. Why not at least allow a secure way of uploading the PDF files? I believe the inserted numbers in the PDF file should be machine readable so that should meet the IRS goal of reducing data entry errors.

Even though I don't want the IRS to try to compete with Intuit, I wouldn't have a problem if they developed a "smart" version of the forms that automatically did the simple arithmetic that is indicated in the instructions. E.g. If line 23 is, in all cases, the sum of lines 20-22, the smart form could do the addition instead of relying on the taxpayer. That would further reduce errors in submitted forms without significantly eating into Intuit's business.

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Post by tfb » Fri Sep 19, 2008 10:17 pm

HueyLD wrote:The IRS can certainly make their software available for any taxpayer, but do we want our government to be in the tax software business?
Why not? British citizens can file their taxes online with the HMRC. See demo at: http://www.hmrc.gov.uk/demo/individual/self-assessment/
HueyLD wrote:If the gov. becomes the only player in providing tax software and tax prep. services, how many more people do we have to hire for the IRS? Does anyone ever notice that the IRS employees are not responsible for any advice they give you? Whom are you gonna sue if the gov. is the only player in town and your taxes are screwed up?
It doesn't have to be the only player. People who need more service than the IRS provides will use and pay for software developed by private companies. As the UK demo link explains, the paid private option and the free government option can co-exist.
You can file your tax return using a range of Internet software, which are available from Third Party software suppliers or you can use HMRC's free product (Online Tax Return - SA).
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Post by Sunny Sarkar » Sat Sep 20, 2008 12:03 am

HueyLD wrote:The IRS can certainly make their software available for any taxpayer, but do we want our government to be in the tax software business?
Why not? Do we need a drivers license update software industry too?

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Post by baldeagle » Sat Sep 20, 2008 1:44 am

MickeyD -- how do you get the free TT from Vanguard? CD in the mail?

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Post by HueyLD » Sat Sep 20, 2008 9:39 am

tfb wrote:Why not? British citizens can file their taxes online with the HMRC.
...
It doesn't have to be the only player. People who need more service than the IRS provides will use and pay for software developed by private companies. As the UK demo link explains, the paid private option and the free government option can co-exist.
I don't know anything about the gov.-provided software in the U.K., maybe Valuethinker can help with his perspective. In the U.S., we already have free e file for low to moderate income taxpayers. A lot of people with income above the cut are not willingly to pay a few extra dollars to e-file. That's the main problem the gov. has to deal with. Maybe the gov. can accomplish the e-file goal by adding a few dollars to one's tax liability for those who choose to do paper filing. :lol:

My response was to Sunny's statement that the private companies want to kill the cash cow. It is not that simple. As I said before, there are lots of taxpayers out there who either will not, or do not want to do their own taxes for a variety of reasons. Even those who do their own taxes, they may not be aware of many tax benefits available to them b/c they think the software must be right. It is SISO unless you at least educate yourself somewhat on tax issues.

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Post by mickeyd » Sat Sep 20, 2008 11:05 am

baldeagle wrote:MickeyD -- how do you get the free TT from Vanguard? CD in the mail?
No, VG links me and others to the TT online version. It works fine and I have used it for a number of years with no adverse consequences.
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Post by Nitsuj » Mon Sep 22, 2008 1:34 pm

About 8-10 bucks seems to be the common price to e-file, what's up with that?

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Post by nisiprius » Mon Sep 22, 2008 2:02 pm

HueyLD wrote:The IRS can certainly make their software available for any taxpayer, but do we want our government to be in the tax software business?
Why not? They were in the human-beings-hand-processing-printed-forms business for decades and were very, very good at it.

I don't believe I've ever encountered a transcription error, even back in the days of handwritten forms, have you?

And their customer service is a lot better than Intuit's. I can get them on the phone faster and the people I talk to are better trained and more knowledgeable.
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Post by greg24 » Mon Sep 22, 2008 2:10 pm

nisiprius wrote:I don't believe I've ever encountered a transcription error, even back in the days of handwritten forms, have you?
I believe the number of errors on computerized forms is lower than that of paper forms.

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Post by jeffyscott » Mon Sep 22, 2008 2:22 pm

Maybe the gov. can accomplish the e-file goal by adding a few dollars to one's tax liability for those who choose to do paper filing.

Looks like that fee should be about $2...
Paid tax preparers submitted about 30 million paper returns in 2007, the report found. If they had instead submitted electronic returns, the IRS would have saved about $65 million...
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Post by chaz » Mon Sep 22, 2008 2:40 pm

mickeyd wrote:There goes the guv'ment trying to eliminate one of my VG benefits. :shock: As a Flagship client I get TT for free anyway today.
Me too.
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Post by chaz » Mon Sep 22, 2008 2:42 pm

nisiprius wrote:
In many cases, people appear to calculate their taxes on a computer and then print out the forms to mail to the IRS, possibly to avoid the extra fee.
Oh, another reason I do it to avoid entrusting a third party with financial data that's nobody's business but mine and the IRS.

I have no idea how secure the IRS is, but adding another link to the chain isn't going to strengthen it.

Intuit, for example, experienced a big security breach in 2004, Credit risk for customers after firm's PCs stolen. That was bad enough, but it just happened again: Lost Computer Exposes Data of 22,000 at Intuit
On the other hand, your envelope could get lost in the post office or delivered to the wrong address.
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Post by House Blend » Mon Sep 22, 2008 4:44 pm

Among the reasons not to e-file, one that hasn't been mentioned is...what's the rush?

Call me a wild and crazy guy, but I like to live on the edge, and aim to have ~95% of my tax liability for the year paid through payroll deduction, and write checks to Uncle Sam and the State for the remaining 5% in April. One of the safe harbors, under most circumstances, is withholding at least 90% of the total tax due.

Sometimes it's tricky (unexpected deductions or income may occur), but I consider it a success if I have to write a fat but penalty-free check in April. I've never come close to paying a penalty with the Feds, but have come close with the State, where the stakes are lower.

So I'm perfectly happy to send hard copies of my tax return and a (gasp) paper check by snail mail. Wonder if I could get away with sending it fourth class. :)

I'm amused by the marketing fluff surrounding e-file. "Get your refund faster!!!" You'd get it even faster if you didn't overwithhold in the first place.

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Post by rob » Mon Sep 22, 2008 5:09 pm

I agree if you pay (and as prev poster, you should aim to) then print and snailmail slowly otherwise fast online. Besides, in the next audit, I want to make sure someone had to pull my paper or at least the auto scanning machine had to do some work rather then me giving it to the in bits from the start.

I heard a long time ago I heard (probably not true).... always staple the return on the right (auto de-stapelers assume they are on the left, so needs manual intervension) and always make the $1 election campain in cash (once cash is received, new set of forms & procedures)... hey if you are paying it's worth a try right :)
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Post by grabiner » Mon Sep 22, 2008 7:15 pm

greg24 wrote:
nisiprius wrote:I don't believe I've ever encountered a transcription error, even back in the days of handwritten forms, have you?
I believe the number of errors on computerized forms is lower than that of paper forms.
I had a transcription error on a typewritten form. New Jersey thought that I had claimed a payment had been made from estimated tax, rather than withholding (adjacent lines on the form), and sent me a bill for the tax due because I never paid the estimated tax I had claimed. The state didn't bother to credit the withholding that I didn't claim on the form, even though it was credited on the W-2.

This took just one letter to straighten out, but my refund (which was very small) was delayed until it got straightened out.
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Post by jeffyscott » Tue Sep 23, 2008 7:57 am

House Blend wrote:So I'm perfectly happy to send hard copies of my tax return and a (gasp) paper check by snail mail.
Have you compared the cost of the stamp, envelope, and check (probably around 60 cents for all 3, assuming it is not over 1 oz.) to the extra interest you are getting from a few days delay? :roll:

How about the risk that your paper return gets lost in the mail, or are you paying even more to send it certified?
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Post by House Blend » Tue Sep 23, 2008 11:30 am

jeffyscott wrote:
House Blend wrote:So I'm perfectly happy to send hard copies of my tax return and a (gasp) paper check by snail mail.
Have you compared the cost of the stamp, envelope, and check (probably around 60 cents for all 3, assuming it is not over 1 oz.) to the extra interest you are getting from a few days delay? :roll:
Compare that with the true cost of e-file, which is not free for many of us. According to other posters in this thread, it is in the range $8-12.

But let's do the rough calc: write a check for $1000 that would otherwise be sitting in (say) VG Prime earning 4% (historically, not now). That's about $0.11/day, so 4 days is about break-even if e-filing were free. I think the check cost me $0.05, but the envelope and mailing label are provided by the IRS.
jeffyscott wrote:How about the risk that your paper return gets lost in the mail, or are you paying even more to send it certified?
My office is ~1 block from a post office. Between that and the preaddressed label, I'm not worried about it getting lost. Normal first class postage is good enough for me, and if I'm worried about it being too heavy for the amount of postage, I can have them weigh it for me.

I did have a funny experience related to this a couple of years ago. I mailed my checks to the IRS and State as usual, and the State check cleared after a few days, but not the IRS. That did get me worried. I looked over my tax documents, and discovered I had used the mailing label to be used by those expecting a refund. Oh Noes!

I called the IRS. The CSR I spoke to said that as long as it was postmarked by April 15, it didn't matter. She said "I'll make a note in your file that you are concerned." :shock:

The check eventually did clear, but it took at least another week, maybe two.

They say that many great discoveries are the result of accidents...

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Post by Nitsuj » Tue Sep 23, 2008 11:44 am

House Blend wrote:My office is ~1 block from a post office. Between that and the preaddressed label, I'm not worried about it getting lost. Normal first class postage is good enough for me, and if I'm worried about it being too heavy for the amount of postage, I can have them weigh it for me.
I don't understand what your proximity to a post office has to do with something being lost in the mail.

I have had several things lost in the mail, and the post office delivers items to my doorstep.

What proof do you have that you mailed it the day you say you mailed it?

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Post by House Blend » Tue Sep 23, 2008 12:07 pm

Nitsuj wrote:
House Blend wrote:My office is ~1 block from a post office. Between that and the preaddressed label, I'm not worried about it getting lost. Normal first class postage is good enough for me, and if I'm worried about it being too heavy for the amount of postage, I can have them weigh it for me.
I don't understand what your proximity to a post office has to do with something being lost in the mail.

I have had several things lost in the mail, and the post office delivers items to my doorstep.

What proof do you have that you mailed it the day you say you mailed it?
I agree that proximity has nothing to do with safety. What I meant was that it is safer to mail it from the post office, as opposed to leaving it in my mailbox with the flag up. I mentioned the proximity only as an indication that using the post office was not a major inconvenience in my case.

As I said in my first post in this thread, I'm a wild and crazy guy. I'm willing to use uninsured first class mail for important things.

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Post by jeffyscott » Tue Sep 23, 2008 1:10 pm

House Blend wrote: Compare that with the true cost of e-file, which is not free for many of us. According to other posters in this thread, it is in the range $8-12.
I thought you were implying than your motivation was delaying the payment of taxes due.

I've never paid to e-file a federal return. I have gone back and forth between both options for various reasons, sometimes it was fees. But, recently I've been filing on paper, just because I find it easier and faster. The software is sometimes convoluted for a simple return and requires me to transcribe information (such as from W-2 form). Last couple years I filled in the PDF forms, printed them and mailed them. I did also put just enough info into a software program to verify that I did not make any errors.

My state has it's own efile system which just involves filling in forms on-line. That's all I really want...fill in the forms and just automate things like calculations and determining taxes (rather than having to look them up in tables).
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