E-File Fees

This is an old story, but I wish to comment, so bear with me. Recently eWeek posted a story about Sen. Chuck Schumer’s war against software companies that charge for tax filing. He takes it back to the IRS’s “outsourcing” of the process of electronic tax filing back under the Clinton administration 10 years ago. According to the article, software companies selling tax processing software has picked up over $1 billion dollars in fees for their services. Schumer’s argument is that these fees are an additional tax on people filing taxes electronically. He proposes that Americans should be able to file their taxes electronically by dealing directly with the IRS.

The article also states that it is cheaper for the IRS to process electronic returns than traditional paper returns.

The Joint Economic Committee’s analysis released April 14 notes the cost of processing paper returns is $2.50 per return; e-filed returns cost only 30 cents.

Intuit (Turbo Tax) and other software providers don’t just file those taxes, they guide you through potential ways you can save on your returns, like taking you through all the various deductions and look for credits that will reduce or eliminate your taxes paid. It’s almost like dealing with an accountant. I seriously doubt that the IRS electronic filing will be nothing more than plugging in numbers. Those than need help filing will more than likely not get the credits and other savings they would receive with a software provider.

Those of you readers who reside in Delaware or who need to file in Delaware may have encountered Delaware’s electronic filing system. It’s nothing more than a secure web form on which you simply plug in numbers. Granted, Delaware’s income tax returns are not near as complicated as the Federal returns, so simplicity is great. Could you imagine letting the IRS direct you through your taxes? I would not and have not trusted them.

Look, the democrats like to present themselves as a defender of the poor, which may suffer more for the fees than those with higher incomes. I know of at least two ways I have gotten free electronic filing on the web. One is at the web site taxfreedom.com. It’s operated by Intuit, those folks that sell Turbo Tax. For those making under $30,000 or active duty military or qualify for the Earned Income Credit, they provide free filing. In fact the first time I used that site they found an extra $500 for me! Second and the one I’ve used more recently, regular TurboTax on the web via my State Farm web site. I’m a customer, and by accessing my account on the web, I simply click on a link for Turbo Tax on the home page for my account. It’s possible that others may provide that service, but I don’t know. Now to be up front, they do charge for filing the state taxes, but like in Delaware you can file those yourself via their web site. The article mentions another site, Free File, which will point the user to free filing sites. I’ve not used it so I can’t comment on it.

Finally from the article:

“As long as the private sector continues to offer outstanding online tax preparation software—at a competitive price to those who buy it—and for free for the majority of Americans through Free File, there truly doesn’t seem to be any sense or benefit in implementing an I-File system,” said CCIA President and CEO Ed Black.

The private sector is meeting the need. Those that think the government is the solution to everything will look for ways to stretch it’s influence into more and more areas. It will be a big waste of taxpayer dollars. Schumer and the democrats need to leave it alone. Lower or remove the income tax, that will help us. Even do something to lower gas prices, like letting somebody drill in ANWR or off our coastlines. That is where it matters.

The article is located at this link.