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Wednesday, September 17, 2008


If you are one of the brave ones that prepares and files your own federal income tax return, you probably use one of the commercial tax preparation software programs to assist you. When you are ready to file your tax return, the programs typically prompt you to file your tax return electronically. This is tempting because it avoids the need for printing out the return and mailing it to the IRS (including saving the postage), and for last minute filers it avoids waiting in line at the post office.

However, when you reach the point in the program to file electronically, if your income exceeds certain thresholds the program will charge you $15 to $30 extra. The IRS believes these fees are dissuading taxpayers from filing electronically. It would like more people to file electronically, since it avoids errors and reduces processing costs. Therefore, the IRS is trying to get the software companies to drop the filing fees.

It is estimated that $1 billion in electronic filing fees are collected each year, so giving up those fees will be costly for the software companies. While they still may do their patriotic duty and reduce or eliminate the filing fees, we shouldn't be surprised if the losses in fees are offset by increases in the prices for the software itself.

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