IRS’ E-Filing Partnership With Tax Firms Criticized

Four national consumer groups blasted the Internal Revenue Service on Wednesday for the tax agency’s proposed plan to partner with commercial tax preparers to offer online filing for low-income taxpayers.

Even though the plan calls for the service to be offered free, the consumer groups “look at this as an opportunity for the preparers to offer other high-cost services on a bait-and-switch basis,” said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group. “We urge the IRS to provide e-filing on its own Web site.”

The IRS said last month that it plans to provide links on its Web site to connect taxpayers to Web sites operated by tax preparation firms, such as H&R; Block Inc. and Intuit Inc., that have promised to provide free online filing for at least 60% of taxpayers.

The details of which taxpayers will qualify for the free filing and precisely how the programs would work have not yet been revealed. The programs will go into effect next year for the 2002 tax year.

Wednesday was the final day to submit public comments on the IRS plan, Mierzwinski said. His group, Consumer Federation of America, Consumers Union and the National Consumer Law Center sent their criticism of the IRS plan in a joint letter to the agency Wednesday afternoon.

The consumer groups’ main concern is that shuttling taxpayers to the professional preparation firms will allow those preparers to sell a variety of expensive services, such as refund anticipation loans and tax advice, before providing the free part of the service--electronically transmitting to the IRS a tax form prepared by the taxpayer.

A spokesman for Intuit said the firm has not seen the consumer groups’ letter and could not respond immediately. H&R; Block couldn’t be reached for comment.

The IRS and California’s Franchise Tax Board had planned to offer free online filing directly through government-operated Web sites, but those plans were nixed in the wake of heavy lobbying from tax preparers, who said the government shouldn’t be competing with businesses.

IRS spokesman Victor Omelczenko said the agency’s goal in partnering with the preparers was well-intentioned.

“Our objective with this program is to help many more people take advantage of e-filing with all of its benefits,” Omelczenko said.