E-filing 2007 taxes begins

Taxpayers can now file their 2007 federal income tax returns electronically.

Although changes to IRS forms affected by new alternative minimum tax laws mean that some taxpayers can't send in their returns until mid-February, the annual e-filing season for the majority of taxpayers was made available by the IRS starting Jan. 11. The date also marked the availability of the Free File program.  Watch "Free tax help"

Free File is a partnership between the IRS and private tax software manufacturers. This year, 19 companies are expected to participate, including such major players as TurboTax (Intuit), TaxCut (H&R Block) and TaxACT (2nd Story Software). A full list of the approved providers can be found on the IRS Web site.

The program debuted in 2003 as a way to encourage more taxpayers to e-file. The program has had its ups and downs. Since its debut five years ago, more than 18 million returns have been prepared and e-filed through the program. But participation has dropped in recent years in part, say consumer advocates, because the program limits participation based on income.  Watch: "Filing taxes - software vs. accountant"

Income limits remain
For the 2008 filing season, taxpayers with an adjusted gross income, or AGI, of $54,000 or less in 2007 can go to Free File and find a provider to e-file their federal tax returns for free. That income threshold is $2,000 higher than last year and the IRS says 70 percent of all taxpayers, or around 97 million individuals, can make use of the free program this year.

While taxpayers who earned more than $54,000 might grumble about the income cap, IRS and Free File members insist that the eligibility limit is a way of getting the program back to its original goal: to make e-filing available to lower-income taxpayers.

"The Free File Alliance is an innovative one-of-a-kind partnership with the IRS that offers free federal tax services to millions of low and moderate-income Americans," said Tim Hugo, executive director of the Free File Alliance consortium of software providers. "We have worked hard to strengthen Free File every year and incorporate user-friendly consumer protections, including critical privacy protections, into the program."

In announcing this year's program, Hugo and IRS officials cited independent satisfaction surveys in which taxpayers have given the program high marks. According to Russell Research, 98 percent said they would recommend Free File to a friend or family member and 95 percent said they would be repeat users of the program.