Tuesday, November 27, 2007

Tax Software Producers Face Lawsuit

Major tax software makers such as H & R Block (TaxCut) and Intuit (Turbo Tax) face a potential class-action suit for excessive e-filing fees. Philadelphia attorney Thomas Marrone and client Stacie Byers argue that the proprietary software is too expensive for working-class and middle-income taxpayers. Tim Hugo, who represents the Free File Alliance, a consortium of software manufacturers, argues that the software agreement to provide free filing for taxpayers earning less than $52,000 per year saves the government nearly half a billion dollars per year and argues that the government should respond if it is believed that taxpayers need broader access to free e-filing. A separate issue: do low-income taxpayers have sufficient access to computers to use the free software which the consortium presumably has available?

Plenty to fault both sides on here since each seems to be overly fixated on entitlement mentality. Nevertheless, the key question becomes--how committed is the IRS and Congress to semi-universal e-filing? If the IRS truly wants the majority of individual taxpayers to use e-filing, Congress probably does have to expand eligibility for e-filing, perhaps to AGI of $75,000-80,000 per year. Otherwise, taxpayers generally should use mail filing and be a little more patient with receiving their refund. Better yet, if possible: reset exemptions claimed to where the taxpayer only receives a small refund; there are much better savings plans than letting the IRS borrow withheld taxes for NO interest.

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