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Saturday, January 28th, 2006

Free Federal Tax Software and Online Filing

My W-2 came in, so I headed over to the IRS website to download all the forms and instructions for filing my federal taxes. While I was there, I checked out the eFile options, because I filed electronically last year and the refund was directly deposited into my checking account in less than two weeks.

I was interested in doing my taxes at home, without buying software, and filing on the Internet – and I wanted to do it all for free. Seems to me that when I’m required by law to file taxes, and it’s easier, cheaper, and less prone to error for the government to process my return if it’s filed electronically, that shouldn’t be unreasonable. But, of course, helping people file their taxes is an industry, and government can’t compete with businesses – even if it’s to comply with a government requirement. California already has CalFile that does all the things I want to file my state tax return.

The IRS does make some effort to get people to file online (after all, it’s in their own interest as well) and they list several options. After digging down through their site, past plenty of advice to hire tax professionals, I got to the eFile Using a Computer page. Once again, I’m confronted with the explanation that the IRS can’t compete with private enterprise, and links to tax professionals, but I find that I can file online for free, through a “commercial partner”, as long as my adjusted gross income is less than $50,000. (I’m going to try real hard here to avoid going into depth about my wife’s seeming guilty obligation to atone for the sins of her ancestors by patronizing our local Native American tribes’ casinos; a guilt so deep that she has to put all her winnings back; my rueful observations that the Native Americans have finally come up with revenge for being introduced to whiskey; my own guilt that my ancestors must have either participated in or benefited from the genocide of the colonization of Australia; and my interest in whether the people we know as “Native Americans” once committed genocide on a people that preceeded them to America – possibly Australians. Believe me, this parenthetical comment is restraining myself.) Last year I filed through H&R Block’s free program, but this year I am not eligible.

The interesting thing that I found from a study of this page is that, although the IRS is adroit at handing out links to commercial partners (after all, where do IRS employees go after they put in their twenty?), they mention that you can download software from the Internet and file online, but they don’t give any links on where to find the software to do this. Break out the trusty old Google. In short order I found TaxAct.

TaxAct offers a Standard version of their tax preparation software that is free, without restrictions, and allows you to file online yourself. I looked at the comparisons between their free and commercial software (which is still pretty cheap), and didn’t see any benefit in paying for an augmented version. This, of course, made me deeply suspicious. I started the download process and found it pretty simple, without a lot of obstacles promoting the upgraded versions, and the required registration process was pretty simple and non-obtrusive. I had to give name, state, zip and an email address, and I remembered to unclick the pre-selected “send me offers” box. The site’s Privacy Policy was lengthy and legal, but acceptable.

But I was still suspicious. The provider pledges that TaxAct Standard is free of spyware, and according to my research, it is, so I decided to install it. The EULA is also acceptable – standard non-indemnification clauses, the only warranty is that the calculations are correct (big deal!) – and has no mention of third party software. In fact, it again mentions the privacy policy:

2nd Story Software, Inc. does not rent, sell or share any personal information received in an e-file transaction other than to transmit it to the IRS for electronic filing purposes, or if required by law. For more information on the taxact.com privacy policy, please refer to: http://www.taxact.com/privacy_policy.asp

Now, I don’t like that my return will apparently flow through the company’s servers on the way to the IRS; in fact, it stinks, but it’s my understanding that the IRS will not allow direct filing to their computers. Write your congressman. The website’s privacy policy doesn’t address this issue. I’ve gone through it carefully, and what it says is that it only applies to www.taxact.com. I wonder what server my tax return will be filed through? I’m going to be running Ethereal when I hit the transmit button.

Still, everything about this company says they’re manic about protecting your privacy. I think I’ll cut them a break. As far as my suspicions go, I was almost relieved to see that the software is total nagware – it’s full of offers to upgrade to the Deluxe edition. But that’s ok with me – I only have to put up with it for a couple of hours and I’m done.

Posted by Greg in Family & Friends, Politics, Posts About Me, Software

2 Comments »

This entry was posted on Saturday, January 28th, 2006 at 15:00 PST and is filed under Family & Friends, Politics, Posts About Me, Software. You can follow any responses to this entry through the comments RSS 2.0 feed. Both comments and pings are currently closed.

2 Responses to “Free Federal Tax Software and Online Filing”

  1. Techno-Tard says:

    Great article, Greg! Thanks for the info and the investigative nature of your search. This will be a help to many of us.

    I have to ask though, if your use of the wording:

    “the refund was directly deposited into my checking account in less than two weeks”

    shouldn’t have actually read: “in fewer than two weeks”? :)

    As always, Love your Blog.

  2. Ramblings » Blog Archive » Less vs. Fewer Revisited says:

    […] Less vs. Fewer Revisited A friend took pleasure in pointing out that I used a grammatical construct in my last post that I had criticized in the post immediately prior. At least he thinks I did. Clearly, he didn’t bother the read the supporting link that I posted: […]