IRS Free File showing results

IRS Free File

Only a month after its launch, the Internal Revenue Service's Free File e-government initiative is showing results, with almost 640,000 returns filed through the innovative public/private partnership, officials said Feb. 13.

The Free File initiative is one of the many methods by which the IRS is attempting to increase the number of electronic tax returns. Under the IRS Restructuring and Reform Act of 1998, the agency has a goal of receiving 80 percent of tax returns electronically by 2007.

These initial reports on the returns filed through the Free File initiative are "very encouraging," said Robert Wenzel, acting IRS commissioner, testifying before the House Ways and Means Committee's Oversight Subcommittee. The almost 640,000 returns represent about 22 percent of the 2.9 million returns filed electronically so far this tax season, he said.

"Cost to the taxpayer has been a barrier to further e-file growth.... That has changed with Free File," he said.

The 17 industry partners in the Free File Alliance — which must meet strict business, security and privacy standards set by the IRS — will report the number of returns filed via the program every month.

The partners have noted that 20 percent of the people visiting the IRS site are going to the Free File page, said Michael Cavanagh, manager of the Free File Alliance.

"The total number of individuals who will return to file their taxes through the program before April 15 remains to be seen, but we fully anticipate that the figure will represent a very large addition to the...returns that have already been filed," he said.

However, even with e-filing growing by 16 percent every year, the IRS is still not likely to meet the 80 percent goal by 2007, Wenzel admitted.

That's partly because the IRS is still working on demonstrating the value of electronic filing, said Kevin Belden, chairman of the Electronic Tax Administration Advisory Committee.

To get the full benefit of the Free File program, IRS officials must look beyond federal tax filing to state tax returns, Belden said. Many citizens will want to be able to file both at once, but many Free File Alliance partners view state-offered free filing as competition and therefore do not include state returns in their offerings, he said.