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IRS pitching filing taxes electronically; Free filing, faster refunds are available to millions.

Byline: Martin Luttrell

It's a few months until the April filing deadline, but the tax man hates paperwork as much as anyone, and is trying to persuade taxpayers to ditch the paper returns and file electronically. And if more accurate returns and faster refunds aren't incentive enough, many taxpayers will be able to prepare their returns and file electronically for free.

The Internal Revenue Service and some 20 private-sector partners are making electronic tax return preparation and filing free for those with an adjusted income of $52,000 or less through the Free File program. According to the IRS, about 70 percent of those filing returns will qualify for the Free File program.

Some 136 million taxpayers will file returns this year, and the IRS expects about 60 percent of them to file electronically.

During a conference call with reporters yesterday, Bert DuMars, director of the IRS Electronic Tax Administration, sought to get the word out to the public that "e-filing" is the fastest, safest and most accurate way to file a tax return. Refunds are made quicker, and can be deposited directly into a user's bank account, he said.

"We're trying to get everyone to e-file," Mr. DuMars said. "It's better for everyone. The good news is that a lot of people who never e-filed, last year used Free File."

The IRS expects to process about 3.1 million tax returns from Massachusetts taxpayers this year, with 1.8 million of those being filed electronically.

Last year more than 73 million people filed electronic tax returns in the United States, or almost 54 percent. The program started in 1990, when 4.2 million returns were filed electronically.

Tax return information is protected through encryption, and an e-filed return is more accurate than a paper return, Mr. DuMars said. Taxpayers can e-file federal and state returns at the same time.

Taxpayers can file electronically through their tax preparer, with over-the-counter software or Internet programs. The IRS does not charge a fee for e-filing, but some preparers and software manufacturers may charge a fee.

Those who qualify for the IRS Free File program, estimated at 95 million nationwide, will not pay a fee. More than 3.9 million people used Free File last year. The program was established in 2003, with 2.8 million users that year, according to the IRS. Mr. DuMars said more people would use the Free File program if they were aware of it. He said two vendors also offer it in Spanish.

The Free File program is only available through the Web site.

Unlike past years, vendors offering the Free File program will not offer so-called refund anticipation loans. The loans have drawn criticism because they often charge a high interest rate. Last year, nine of the 20 vendors participating in the Free File program offered refund anticipation loans.

"We got no complaints from consumers, but we received complaints from consumer groups and Congress," Mr. DuMars said. "We took those seriously and came to an agreement. Consumer groups and Congress don't like refund anticipation loans. If you're getting a refund, you should get a full refund. If you can wait a couple of weeks, you will get the full refund and no fees."

Backing up his case for electronic filing, Mr. DuMars said that it costs 55 cents to 75 cents to process an electronic tax return, but about $2 to process a paper return. There is a 1 percent error rate for electronic returns, compared with a 20 percent error rate for paper, he said.

Mr. DuMars said some vendors in the Free File program will file both federal and state tax returns without charge. He said the IRS cannot endorse any provider, but he referred taxpayers to the "Guide me to a service" wizard on the Web site to shop among the participating vendors.

He said taxpayers can use the Free File program to request the one-time Telephone Excise Tax refund, which ranges from $30 to $60. The program can be used solely for the telephone tax refund, even if the user is not filing tax returns, he said.

In addition to the IRS vendors, Massachusetts residents can find other vendors to prepare and electronically file state tax returns for free, subject to income guidelines, by going to the state's Web site and entering "Massachusetts Free File Alliance" as a search item.

"We're going to reach Congress' 80 percent goal. Maybe not this year," Mr. DuMars said, saying it is more likely to be around 60 percent. "We don't want to lose the momentum we've built. The news that's not so great is that 40 million returns are done on a computer, then printed out and mailed to us.

"We got 73 million e-file returns last year, (and) should get 80 million this year. It was an aggressive goal, but that's why we were able to be this successful," he said.

Contact business reporter Martin Luttrell at


Electronic filing in Massachusetts outpaces paper tax returns to the IRS

Year % Paper-filed % e-filed

2006 47% 53%

2005 50% 50%

2004 61% 39%

2003 65% 35%

2002 70% 30%

Source: Internal Revenue Service

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Title Annotation:BUSINESS
Publication:Telegram & Gazette (Worcester, MA)
Date:Jan 17, 2007
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