My wife and I did our taxes last night and decided we would try to E File the returns. When we visited the IRS web page we saw where there is a $29.95 fee to E File. We thought they would want people to E File and the cost,if any, would be much less. What gives? Anybody know if this is a customary charge or we doing something wrong. Please advise! Thanks! We mailed them for .37 cents, much cheaper!

I think that you can only file for free if you meet certain guidlines.

You could have used TurboTax online for $9.95.

You can also volunteer at a VITA site and prepare taxes for low income people. Then you get to prepare your taxes and efile them for free. It also helps out people who really need it.

I thought several programs, TurboTax included, had free filing. Actually, I believe there is a fee and you submit a coupon for reimbursement.

I bought TaxCut which doesn't provide this. No matter, I usually don't send mine in until 04/15. Guess why! And unless you have a need for the funds that will provide a real early bird discount or something, the cost to e-file (when you pay a cost) is usually worth the cost of funds to get it a few weeks earlier than with direct deposit.

Actually you could use TurboTax Basic for $9.95 if you filed by 2/13 and it is only $5.95 for a 1040EZ.

Get Free Online Tax Filing--While It Lasts.

TurboTax and other major vendors offer free Web-based tax preparation and electronic filing to all via the IRS--but they aren't happy about it.

If you're looking for a great deal on Web-based tax software, start your search at the IRS's Free File Alliance Page: You'll find offers from all major tax-software vendors for free online tax preparation and e-filing.

In almost all cases, no restrictions apply: All you need to do is link to the vendor of your choice from the IRS Web site. All the major vendors are listed, along with a brief description of what the company is offering (typically, it's their basic Web-based 1040 software). When you've made your choice, you simply click on the product name to leave the IRS Web site and then land on a special page where you can sign up for the Free File offer.

The savings on your federal return vary: Intuit, for example, is offering the basic version of TurboTax for the Web (plus e-filing) for free to those who arrive from the IRS's site; all others must pay $20. H&R Block's standard Web-based service is free when accessed via the Free File Alliance site, $30 when you go straight to H&R Block's Web site. TaxAct offers its basic Web-based software for free to all, but if you sign up via the FFA site you don't have to pay the $8 that other users are charged for e-filing.

There's also a Free File program for state returns, but most vendors still make those returns available only to some taxpayers; Intuit, for example, doesn't offer a free state return for California.

(PC World last month evaluated a number of these Web-based tax services. Find the review here.)

The E-File Imperative

So what's the catch? For newcomers especially, there is none. For those who've used tax software services in the past, however, the free-file offers have at least one significant drawback: You can't import a previous year's data file, which means you have to manually enter every last bit of information--a potentially time-consuming task, especially for people with lots of investments or assets to track.

The only other caveat is that Free File Alliance members can change their offers up to twice during the tax season--so if you're interested, you should probably enroll quickly just in case the vendors decide they've been too generous. The IRS says taxpayers filed 3.5 million returns through the Free File program last year--a little more than 5 percent of the total 61.5 million returns filed.

Why are these companies giving away a product they normally charge for? Intuit spokeswoman Julie Miller says competitive pressures prompted the company to offer TurboTax for the Web for free, but adds that this wasn't the way the Free File Alliance program was supposed to work.

The FFA was founded several years ago by a consortium of software companies who wanted to keep the government out of the tax-software business. At the time, the IRS was thinking of offering its own free tax-preparation software in order to encourage people to file their returns electronically. The IRS has set a goal of receiving 80 percent of all returns electronically by 2007.

Keeping Tax Software Private

But in October 2002, the FFA and the IRS reached an agreement in which the IRS pledged not to provide free tax software; in return, FFA members committed to collectively making free Web-based software available to at least 60 percent of the tax-paying population. Miller says a subsequent operating agreement "includes language that this program is really about bringing online tax services and e-file particularly to underserved and lower-income tax payers."

In the first year of the program, which covered returns for 2002, the FFA achieved the agreed-upon coverage through an assortment of member offers described by Intuit's Miller as philanthropic. The offers targeted taxpayers who might have been avoiding tax software because of the cost--veterans, seniors, young people, or people with annual gross income below a certain level.

Free Filing as Loss Leader

The following year, Miller says, some tax software companies decided to waive all restrictions, essentially using their FFA offer as a loss leader to attract new customers. So this year, Intuit and other major vendors followed suit.

"We took this strategy to level the playing field," Miller said, noting that Intuit particularly wanted to make TurboTax attractive to the 40 percent of Free File customers who are new to tax software. Intuit still makes money from many of these customers, who after filing their federal return for free wind up paying $25 to complete and file a state return, Miller says.

Finally, Intuit hopes that once these customers get started with TurboTax, they will return next year and pay the full price in order to import this year's data.

Although consumers benefit from this sort of competition, the tax software companies aren't happy. "Intuit is concerned that the program is not being used for the philanthropic purpose it was intended," Miller said.

IRS as Free-File Cop?

The question of whether the IRS is obligated to make sure the Free File program only serves disadvantaged taxpayers is where the vendors and the IRS appear to part ways.

"The IRS is running the program as laid out in the original agreement with the Free File Alliance," IRS spokesman Eric Smith said in a statement. "It is up to each of the individual members, not the IRS, to set the guidelines for their offerings."

The original FFA agreement expires next fall, so tax software vendors and the IRS have the next few months to revisit the program.

This really irks me. The IRS could offer their own software; thus, saving millions of taxpayers millions of dollars. Instead, they enter into an agreement that is not well publicized. I am usually against the government competing with business, but I do not consider this competing--it is merely going where the technology allows. The technology is there for the IRS to have free on-line tax software and filing. Otherwise, we have to read reviews of software, like the ones linked to in my previous post, then hope we know how to get to the "free" software. This just smells to me. This is one case where the government should provide us the product. Haven't we paid for it already anyway?

I've used H&R Block's on-line tax service for the past 5 years. I love it. Yes, I pay for it - but they give so many helpful hints and worksheets to help you figure out the best options for filing that it's worth it to me. There were a number of deductions that I didn't know existed. I e-file state and federal taxes and have the refunds direct deposited to my account. I should be receiving them by 2-22-05.

Hmm....anybody use Tele-file? (for 1040EZ). I did my taxes this weekend, using tele-file and when I got to the end of it there was message saying that tele-file will no longer be an option for filing taxes after this year and that I was encouraged to check out e-file. The tele-file is so easy! (And free). But if e-file is going to charge 29.95 for me to file my piddly little EZ return, I'd rather just go get the old paper EZ form and mail it for .37.

I figure at some point they'll phase out the paper returns, force us all to the computer, and then charge us ten to fifteen percent of our refund for the fee, or tack on the fee (amount to be determined by the IRS depending on their mood) to what we already owe.

Ya think? LOL

I did use free federal filing with Turbo Tax and it worked fine. I received my refund within 2 weeks. Puerto Rico, here we come!!

For state, I used the state's free filing system.

I used Tax Act and e-filed federal and state both for $15.95.

I have used Taxslayer the past 4 years and it works great for me. The fee is $9.95 to file federal and state. I usually get my refund within 2 weeks.

Don't miss my post above that gives you free software and e-filing just for the asking:

http://www.irs.gov/app/freeFile/jsp/index.jsp?

YOU MUST LINK TO THE SOFTWARE PROVIDER'S WEBSITE FROM THIS PAGE AT THE IRS SITE TO GET IT FREE!!! HAPPY FILING!!!!!!!

We offer a program provided by CU 24 (ATM network) That provides the state and federal program and efile for $24.95. Our members really like it.
www.eztaxreturn.com/cu24

I checked out the demo and it seems pretty simple.

Go to www.irs.gov
They give you a selection of services to use for free e-file. I went through irs.gov to turbo tax. My taxes were efiled completely free. I have had my refund for days. I also filed my state (NY) through them, and did have to pay a $19.95 fee for doing so. I could have just mailed them in, but didn't want to be bothered. So, there was a fee for NYS, but not for federal. You just have to do some research.....

I pay a local CPA $100 to do mine, and she can e file them for me, at no cost to me. I have too many things going on with my taxes to want to do them myself. I wouldn't want to mess up. It's worth the $100 when I get back more than $4000

Apparently your CPA might not be as good as you think or he would have you change your deductions. Unless you have some really outrageous deductions (like a dozen kids or business losses) or are having extra withholding done, I would question that large of a return, even if you're in the upper income levels.

He doesn't get a percentage and talk a lot about the reparations tax credit does he?

I used the free software but for some reason it would not allow me the under 17 child tax credit, so I did mine the old fashion way. The birthdates I entered were correct so I was baffled.

I think the real cost is our mental math skills. It's a shame that so many people no longer do their taxes in their head, and they rely on a computer to do everything for them. How do you know your taxes are correct? Because a computer told you so? That's what wrong with kids these days...

(P.S. ~ That was for all who remember my initiation into posting on BOL!) LOL ;-)

If they would stop changing the tax laws more people would do it themselves. I know many brilliant people who can't do their own taxes because they are so complicated. One is even an accounting professor.