Electronic filing expected to rise with no-cost program

Jim Hojnacki works on the return of Tracy Eaker, of Toledo, at the IRS office downtown.

It started with a trickle in 1986, when just 25,000 of the nation's taxpayers filed their returns electronically with the Internal Revenue Service.

But by last year, e-filing had turned into a flood. The IRS says 73 million returns, or more than half, were filed electronically.

And now the IRS predicts that millions more taxpayers will be attracted to file by computer because of its expanded Free File program for which up to 95 million taxpayers could be eligible.

But there's a catch. The federal return is free, but some of the 20 firms cooperating in the program will charge extra for state returns - typically $10 and up - and they will try to peddle additional services.

Filers need to check out the offerings by the 20 companies and should start with the agency's own Web site: www.irs.gov. The full list of firms is there, along with links to them, but the IRS cautions that going directly to one of the sites could lead to an unexpected fee.

Some 20 firms impose other limits, such as age, or incomes lower than the $52,000 maximum. Some, for example, set the limit at just under $39,000, the earnings cap to qualify for the popular earned income credit. In other cases, taxpayers must live in certain states.

The IRS has tightened requirements for the participating companies, perhaps in response to criticism about confusion and some abuses in earlier programs. For one thing, they're no longer allowed to pitch "refund anticipation loans."

Electronic filing is being pushed by the IRS as being faster, more accurate, and less costly for the government.

More than half the taxpayers in Ohio and Michigan e-filed last year.

But the Free File portion of the filings is still relatively small - 3.9 million last year, up from 2.8 million the year before.

Those who don't qualify for Free File can get tax-filing software at stores for $20 to $70, and some software can be downloaded for $10 or less.

Telephone filing, begun in 1992, has disappeared.