FROM THE OFFICE OF PUBLIC AFFAIRS

What is Free File?
Free File is an Internet-based tax preparation and electronic filing program. The online service is free for eligible taxpayers. Free File is offered through an agreement between the Internal Revenue Service and the Free File Alliance, LLC, a private-sector consortium of tax software companies. Eligible taxpayers will be able to prepare and file their federal income tax returns using online software provided by the Free File Alliance members – not the IRS. 

Who is eligible for free services?
Each participating software company sets its own eligibility requirements. The requirements will differ company to company. Generally, eligibility will be based on factors such as age, adjusted gross income, state residency, military status or eligibility to file a Form 1040EZ or for the Earned Income Tax Credit.

How many taxpayers will be eligible for Free File?
The agreement requires the Alliance, as a whole, to provide free services to at least 60 percent or 78 million of the nation’s taxpayers through April 15. The primary candidates for Free File are those taxpayers who prepare their own taxes and still file paper returns. Last filing season, the IRS received nearly 85 million paper returns and nearly 47 million e-filed returns.

How do taxpayers determine if they are eligible for Free File?
Taxpayers can access the Free File homepage through IRS.gov. On Free File pages, they can browse the summary of each company’s offering or use the Free File Wizard, a questionnaire which helps match their circumstances with companies’ services.

What is the Free File Wizard?
Taxpayers will find a questionnaire application on the Free File homepage. After a few questions, the Wizard will seek to match the taxpayers to those Free File Alliance members’ for whose services they may qualify. The accuracy of results is dependent on the accuracy of the information provided by the taxpayers.

When will Free File be available?
 These free services, accessible through IRS.gov, will be available throughout the 2003 filing season to eligible taxpayers starting January 16, 2003.

How does Free File work?
It takes just a few steps once taxpayers reach the Free File Website through IRS.gov. The Free File pages provide a list of Alliance members and their free services. 

STEP 1: DETERMINE ELIGIBILITY
At the Free File homepage, taxpayers have two options for determining their eligibility for free services.  They may browse the complete listing of Alliance members and their free services. Or, taxpayers can use the Free File Wizard, which will identify those free services for which they may qualify.   Each Alliance member will identify their company name and will have a simple description of the criteria for using their free service.  Each Alliance member’s company or product name will be linked to additional information about the company and services.  Not all taxpayers will be eligible for these free services.

STEP 2: LINK TO FREE SERVICES 
Upon determining eligibility, the taxpayer can link directly to that Alliance member’s free service by clicking on the Alliance member’s “Start Now” link.  Upon doing so, taxpayers will be notified they are leaving the IRS.gov web site and are entering an Alliance member’s web site.

STEP 3: PREPARE AND FILE TAX RETURN
At the Alliance member’s Web site, taxpayers can prepare their tax returns using the member’s online proprietary software. Completed tax returns will be sent electronically from the Alliance member to the IRS through existing e-file system using secure telephone lines. Taxpayers will receive an acknowledgement of receipt or rejection of their return via an email from the Alliance member.

How will taxpayers’ security and privacy be protected?
Free File Alliance members must comply with all federal rules and regulations on taxpayer privacy for both Free File and paying customers. Those rules prohibit use of tax return data for purposes not specifically authorized by the taxpayer. Tax return preparation will be accomplished using proprietary software approved by the IRS; transmittal will be through the established IRS e-file system. Each Alliance member must attain a third party privacy and security certification.

What information will the IRS collect or retain from taxpayers as a result of using Free File?
The information you provide through the Free File Wizard will be used to help you select a free service only; thereafter it will be deleted.  The only information retained by the IRS is the tax return information that is officially filed with the IRS.

Can Free File Alliance members share taxpayer data with anyone besides the IRS?
No.  As part of the agreement, the Alliance members must adhere to the strict privacy standards of the IRS.

What oversight of the program will the IRS provide?
The IRS will monitor the progress of each of the Alliance members.  If any problems should develop, the members are required to alert the IRS.  If appropriate, the IRS will remove the company from the on-line listing until the problem is resolved.

What type of Customer Service Support will be provided to taxpayers?
Alliance members must provide appropriate customer service to their clients as part of the agreement. Taxpayers who have service questions or who are experiencing problems should contact the customer service function of that particular company.  In the event taxpayers contact the IRS first, the IRS Customer Service Representatives will have contact information for each Alliance member and, if necessary, will refer accordingly.

What benefits will taxpayers receive from Free File?
The intent of IRS Free File is to reduce the burden on individual taxpayers, make tax preparation easier and expand the benefits of electronic filing to a majority of Americans.  The benefits of using these free services are identical to those of e-filing, which include:

• Reduced tax return preparation time;
• Faster refunds;
• Accuracy of return;
• Acknowledgement of return receipt.

Alliance members’ proprietary software will assist taxpayers in completing their returns and help ensure taxpayers are aware of tax credits and deductions for which they may be eligible. The tax preparation software has been tested for compatibility with the IRS. Accurate online preparation and filing vastly reduces errors.  Common mistakes, such as math errors or transposing Social Security numbers, can prompt refund delays.

Also, e-file users can file now and pay later if they owe taxes.  E-filers can pay taxes electronically by authorizing an electronic funds withdrawal from a checking or savings account or by using a credit card. Or, they can mail a check to the IRS by April 15.

Is this Internet filing?
Yes.  The free services will be provided via the Internet; taxpayers will enter data with calculations performed online.
What happens to the taxpayer who does not qualify for Free File?
For those taxpayers who do not meet the eligibility requirements, Free File Alliance members will explain how much they will charge should the taxpayer want the preparation and e-filing service. In addition, the private sector provides numerous options for taxpayers to purchase online or software products. Taxpayers may also choose a tax professional for online preparation. The private sector may also charge a fee to electronically transmit tax returns through IRS e-file. IRS e-file consistently has a high satisfaction rate among users.

How many taxpayers e-filed their returns during the 2002 filing season?
Nearly 47 million taxpayers chose IRS e-file in 2002 – 16 percent more than the previous year. The IRS anticipates 54 million e-filers for the 2003 filing season. (There are approximately 132 million tax returns filed by individuals.)
 
How will eligible taxpayers who lack computer access make use of Free File?
The IRS hopes to work with existing coalitions, churches and community associations to expand computer access to taxpayers without home computers. Also, Free File is only one option for low-income taxpayers. The IRS also supports many volunteers during the filing season through Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE). In addition, the Taxpayer Assistance Centers at most local IRS offices can aid low-income taxpayers.

Why was the Free File Alliance formed?
In November of 2001, OMB’s Quicksilver Task Force established 24 e-government initiatives that are part of the President’s Management Agenda.  These initiatives were designed to improve Government to Government, Government to Business, and Government to Citizen electronic capabilities.
One initiative instructed the IRS to provide free online tax return preparation and filing services to taxpayers.  In accordance with this OMB directive, the IRS began working in partnership with the tax software industry to develop a solution.  The result was the formation of the Free File Alliance, LLC, a group of tax software companies, managed by the Council for the Electronic Revenue Communication Advancement (CERCA), who will provide free online tax preparation and electronic filing services.

Why is the government doing this through a partnership with private industry rather than providing its own software free to the public?
The government believes that private industry, given its established expertise and experience in the field of electronic tax preparation, has a proven track record in providing the best technology and services available. The Government believes that a partnership with private industry will: provide taxpayers with higher quality services by using the existing expertise of the private sector; maximize consumer choice; promote competition within the marketplace and meet these objectives in the least costly manner to taxpayers.

Some private sector firms have offered free e-filing to select taxpayer groups for several years; how is this approach different?
This approach offers a multi-year agreement between the IRS and the Free File Alliance to provide these free service(s) to more taxpayers.  Previously, free offerings were not consistently available.
Taxpayers will have easier access to the Free File web page (hosted on IRS.gov), which will provide a listing of all free offerings in a single location.
Alliance members will offer both free preparation and e-filing services.  There will be no cost to the taxpayer.  Previously, some companies charged for preparation (filling of forms and tax calculations) while offering the transmission free, or provided the preparation free while charging for transmission, or some variation thereof.  Under the Agreement, both are free to eligible taxpayers.

How do taxpayers decide which service to choose?
Taxpayers should explore all their options among the free services. The IRS does not endorse any specific company.

Does this process encourage taxpayers to use Refund Anticipation Loans?
No.  Taxpayers are under no obligation to use Refund Anticipation Loans or to purchase any product from the software company. The tax preparation and electronic filing service are free to eligible taxpayers. Obtaining a fee-based product is a decision left to the individual taxpayer.  The IRS reminds taxpayers that using e-file with direct deposit can result in receiving a refund in 10 days or less.