Wednesday, July 04, 2007

Frustrating Flaws in IRS Free File Software

The Inspector General for Tax Administration criticized software for the Free Filing program for shortcomings in credits related to children. In addition, Senator Max Baucus (D-MT) and Charles Grassley (R-IA) were critical of the IRS's decision not to test the software before use. Particular problems existed in the determination of dependency exemption and the use of child and dependent care and earned income credits. At present, only about 3% of eligible filers use Free File and the number of taxpayers using Free File dropped for the 2005 year vs. the 2004 year (as pointed out in a previous post).

Wow!! No wonder that taxpayers are staying away from Free File in droves! This program is an important supplement to VITA in reducing tax compliance costs for low-income taxpayers--but ONLY if it can be trusted.


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