Finessing Free File
Thursday, January 18, 2007
The Free File Alliance, the private-public partnership between the IRS and tax software/preparation firms, kicked off its fifth season on Tuesday with a few changes.
The income eligibility limit was bumped up a bit, from $50,000 to $52,000. If your adjusted gross income is that or less, you probably can find one of the participants that'll let you do your taxes and e-mail them at no cost.
More notable, refund anticipation loans (RALs) and what the IRS calls "ancillary" products are no longer advertised.
I got a call from one of the Free File companies after my story about this year's program was published. The spokesperson wanted to point out that Free File is a partnership and the private firms who participate were fully involved in making the no-RAL call; they weren't forced by the IRS to change their procedures.
To me, that's getting a bit deep in semantics (and other things). If the companies said they still wanted to offer them and the IRS got pressure from Congress (which it did) and said no way, who do you think is going to win? It's kind of like you can't fire me because I quit.
Obviously, the companies that don't offer the loans were fine with them being taken off the site. I spoke to a couple of them, too, who were quick to point out how much more consumer-friendly Free File is this year without all the upselling.
Wow! Such concern for the customer from everyone! Kumbaya is getting louder by the moment.
Let's be honest. The program is a good deal for many taxpayers. And despite the complaints last year when income limits were reimposed after a year of free file for all, it is now operating along the lines for which it was created.
The motivation for Free File was to provide people who normally couldn't afford tax software and e-filing fees an option. Somebody making $150,000 can afford to shell out for tax software and another .01 percent -- that's point-zero-one, in case the print is too small -- of his or her income to e-file.
But then when you get those less wealthy folks online, you don't need to be trying to take the money they're saving on Free File by enticing them to buy another product. I know, I know -- America, U.S. of A., free market, laissez faire and the sad, but true offshoot of all those clichés: caveat emptor.
True, as the Free File company spokesman said, there is a market out there for RALs and there are people who have no bank accounts and want other options when it comes to getting their tax money back from Uncle Sam. And some people are able to make them work in their favor.
But even the company spokesman admitted that a RAL could turn out to be, in his words, "an expensive product" for some consumers. I agree with critics of these products that when they are on a government site like Free File, they get an implicit government imprimatur. And I don't like that.
As much as many folks dis Uncle Sam, when it looks like, even unintentionally, that he's saying something is OK, they accept that. And he definitely doesn't need to be even a remotely tangential marketer of these loans.
Other quick and costly ways to get your tax money: Annys Shin at the Washington Post's The Checkout blog takes a look at another product now being emphasized at filing season: the pay-stub loan. She, too, finds the industry very concerned about the financial problems these can cause consumers.
And speaking of consumers, the Consumer Federation of America has released its annual report on RALs. You also can read ConsumerAffairs.com's report on the CFA report.
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