Of online filing and fees

Friday Jan. 15, 2010
Posted 11 a.m. EDT

If you plan to file your taxes online, today's the day you've been waiting for. The IRS begins accepting electronically filed taxes today.

Also kicking off is the agency's Free File program. This partnership of the IRS and private manufacturers of tax preparation software is available again this filing season for certain taxpayers.

This year, taxpayers with adjusted gross income of $57,000 or less can use Free File. The IRS will officially announce other details of the program this afternoon. We'll get you all that info shortly.

In the meantime, be sure to check out today's tax tip, which looks at your various e-filing options.

Filing trends: The IRS has been encouraging us to e-file for years. The agency had hoped to have 80 percent of us sending our returns via cyberspace by now. OK. It was more than hope; Congress had ordered the agency to make it so.

Unfortunately, that 80 percent level is still a ways off. Last year, 67 percent of us e-filed our tax returns. That's short of the e-filing goal, but still almost 95 million returns came in electronically. And once again, that was a record.

The growth sector, according to the IRS, is individual taxpayers e-filing themselves from their home computers. More than 32 million returns were e-filed from PCs, up almost 20 percent from last year's record of 27 million.

Not to get too wonky with the numbers, but as is often the way when it comes to anything associated with computers, it's young people leading the way. Or so says a new survey conducted by Opinion Research Corporation for CompleteTax, the online tax return filing software from CCH.

Online tax preparation is most popular among people ages 18 to 34 years of age, where 16 percent plan to use online tax programs and 8 percent packaged software. At the other end of the age spectrum, the survey found only 2 percent of taxpayers 65 or older use online tax preparation options; only 6 percent of that older age group use off-the-shelf packaged software.

The CompleteTax survey also found that people who prepare their taxes online are by far the most likely to electronically file those PC-prepared returns.

Credit the e-file cost: The one downside of e-filing is that in many cases you have to pay an added cost. I must admit that there have been years when I've used tax prep software but snail mailed my return, especially when I've owed the IRS.

If I have to write a check to the feds, I don't want to spend a penny more than necessary. So instead of paying $15 or so to e-file, I've printed out the software prepared return and schlepped to the Post Office.

Yes, I know that the snail mail route isn't necessarily cheap. There's the certified mail fee, but I want that proof I got my 1040 in on time. Then you have to factor in the time and gas spent to get to my local postal branch.

But it's the principle of the matter. If Congress and the IRS want us all to e-file, then it shouldn't have to cost us a dime. I know some software makers have in recent years provided e-file at no cost (although in some cases, the price of the software inched up a bit). And I know that most online-only tax-prep companies offer customers free e-filing.

It shouldn't even have to be a consideration. I'm a fan of the perennial proposal that e-filers get a credit for doing so. I'm no programmer, but I suspect that adding a feature that would automatically enter that amount as a credit would be a snap.

That way private companies could charge what the market will bear for the option and Uncle Sam, who benefits from e-filing as much as we taxpayers do, could foot the bill.

Read more tax blogs.


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