Bankrate's 2009 Tax Guide
Filing & refunds
taxes
New free filing option for more filers

The IRS also has once again asked the participating companies to not do something. "There are absolutely no ancillary financial products that can be marketed through the Free File program," says Williams. The IRS put its foot down in this regard after complaints from consumer groups that some Free File vendors were "up-selling" refund anticipation loans and similar potentially costly financial programs to taxpayers who signed on primarily to complete and file their taxes for free.

Fillable forms for all
If you don't qualify for Free File because you made too much money last year, you still can file for free using the new fillable form option.

It's open to anyone regardless of income, but it does have some limitations. There is no interview based filing program, no assistance that's typically associated with tax software. "It's simply an electronic version of forms people have used for millennia," says Williams. "It will do the math for you, but you have to have some basic knowledge of your filing situation."

Once you've completed the forms at your computer, you then press e-file and the tax documents will be sent electronically to the IRS at no charge.

Commercial providers go free, too
Of course, that's not such a problem this filing season since the two major tax software programs, Intuit's TurboTax and H&R Block's TaxCut, this year are offering e-filing at no extra charge to customers who buy the software packages off the shelf. Such an option has been provided by 2nd Story's TaxACT for years, as well as with the online version of many software packages.

Even with this price break, you still need to shop around to make sure that the overall cost fits your budget and that the software package provides any other filing options you need, such as state returns. But the no-fee e-filing feature of the commercial products should help boost the electronic tax stats even higher.

Williams cites the competitive nature of tax software as a likely reason behind the decision to ax the separate e-filing fee, which he calls a "real thorn in the side of people, a real barrier to electronic filing." Many taxpayers have balked at the extra charge, which could run as high as $20, when they could mail their paper returns for literal pennies.

"The marketplace and landscape is changing," Williams says. "You have two big companies and a variety of smaller companies and that competitive pressure is driving out things like separate fees."

Are fillable forms the future?
Will the private tax software sector now have to worry about additional competition from Uncle Sam via fillable forms? Probably not.

"We don't think most people will use fillable forms," says Williams. "Evidence we have from data collected from surveys and analysis doesn't seem to indicate that many people will use it."

Intuit, maker of the market-leading TurboTax, is taking the new government free filing option in stride. "Intuit fully supports making a free, simple forms utility available through the Free File Alliance on www.IRS.gov," says Intuit spokeswoman Julie Miller. "The addition of electronic, fileable forms that anyone can use, especially manual filers, supports the IRS' goal to increase e-filing."

The IRS does hope, however, that the option this year will provide the agency with more information about e-filing habits and how to get electronic tax participation to 100 percent. "We're trying to see how much each add-on will prompt more filers," says Williams. "Fillable forms will help in this data collection."

That information could come in handy when dealing with those members of Congress who in recent years called upon the IRS to create its own online filing portal to allow all taxpayers to submit returns at no cost. The IRS is not as enthusiastic about the idea.

"It's unclear to me at this point that there is a need for the government to do this if we can leverage the expertise of the private sector to deliver the fastest and best process for everybody," says Williams.

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