Editorial: Tax Day

By BDN Staff
Tuesday, April 17, 2007 - Bangor Daily News

As if figuring and filing your taxes weren't frustrating enough, the IRS encourages you to file electronically and then charges for a service that makes the agency's work easier. Congress has a chance to rectify this with a bill that would let taxpayers file electronically for free. Coupled with better management of personal information by the IRS, this bill should make e-filing more palatable to more Americans, saving the government even more.

Hawaii Sen. Daniel Akaka, a sponsor of the Free Internet Filing Act, told his colleagues it costs the IRS 55 cents to 75 cents to process an electronic return versus about $2 for a paper one. The error rate for electronic returns is about 1 percent, compared to 20 percent for paper returns.

The IRS' national taxpayer advocate and its Board of Overseers support free e-filing. Taxpayer Advocate Nina Olson suggests her agency follow the example of the Department of Education's college financial aid forms which are available online.

So why do many taxpayers have to pay to file electronically?

In 2002, the IRS negotiated an agreement with the tax preparation industry. The IRS would not let taxpayers file directly with the agency if the industry offered free electronic filing to 70 percent of their customers. Those with adjusted incomes under $52,000 are supposed to qualify for free electronic filing, but negotiating the forms to see if you qualify can be time-consuming and confusing. Those who don't qualify pay an average of $10 to file electronically through a third-party company, which collects the returns and forwards them to the IRS.

The number of returns filed electronically has grown steadily in recent years, reaching 72 percent this season, but still short of the IRS goal of 80 percent. Less than a third of electronic returns come from taxpayers who use their home computers to file.

Congress can help the process by beginning the transition to free electronic filing for all taxpayers.

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