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2007 Tax Guide    
  A tax tip a day will help keep the IRS away. You'll find them here, along with good advice on filing your return.
See Bankrate's 2008 Tax Guide for the most up-to-date tax information.
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Free filing in, refund loans out

Slightly higher income threshold
That income limit is a bit higher for the 2007 filing season. Taxpayers who make $52,000 or less ($50,000 was the earnings cut-off last year) can select from the Free File companies that will be listed on the official IRS Web page beginning Jan. 16.

In previous years, around 20 companies participated. Most of them are expected to be back this year, as the free file program has settled into a regular routine. Aside from the software updates necessitated by the late December approval of several tax deductions, there shouldn't be any surprises.

And while refund loans are out, companies are still allowed to charge extra if taxpayers want to e-file state returns along with their federal forms. The IRS is encouraging participating software companies to offer state filing for free, too, but in the days leading up to the opening of the 2007 free file season, just how many would do so was unclear. Software makers, perhaps to keep competitors from getting a jump on or catching up with one another, were tight-lipped about any Free File enhancements they are offering.

Hoping for a rebound
The IRS says that under this year's guidelines, more than 93 million taxpayers will be eligible to use Free File. Tax officials would love to see every single one of them use the program, but realistically they'll settle for an increase over last year's tally.

Although e-filing by individuals via PCs was up more than 18 percent in 2006, Free File bombed. Use of the system was down by almost 23 percent when compared to the 2005 season, with only around 3.8 million taxpayers using Free File last year.

The main reason for lower participation: The program dramatically restricted access based on taxpayer income. In 2005, any taxpayer regardless of income could file for free. In 2006, only taxpayers making $50,000 or less could.

Some seek free for all
Consumer groups, pleased that they won the refund loan battle, have now set their sights on obtaining full accessibility for free filing.

"You don't have to pay a commercial company to mail in your paper tax returns, so why should you have to pay them to electronically send them?" asks CFA's Fox. "Free file will not be selling high-cost, dubious extras and that's progress. But it's still not an easy way for all taxpayers to file their returns."

Some lawmakers agree with the consumer group's assessment.

Sen. Charles Grassley, R-Iowa and former chair of the Senate Finance Committee, last year told the IRS that Free File income restrictions undermine "the principle that no one should be forced to pay to electronically file a tax return." The IRS, he added, "has an obligation to taxpayers to make sure 'free' really means 'free.'"

The Senate committee's new chairman, Montana Democrat Max Baucus, has also voiced his concern about the IRS decision to continue the program's income limit. "A direct portal on the agency's Web site should allow taxpayers to file directly and truly for free, regardless of income," he says.

-- Posted: Jan. 16, 2007
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