"This represents an important step forward for taxpayers and our e-filing efforts," said IRS Commissioner Charles Rossotti, who signed the agreement Wednesday with Free File Alliance manager Mike Cavanagh.
Taxpayers usually pay a fee, averaging $12.50, for online filing, which is on top of fees for preparation services or computer software. Of the 125.6 million tax returns filed this year, 46.5 million were filed electronically.
Under the terms of the agreement, participants in the consortium of preparers and filing services must provide free services to at least 10 percent of the taxpayers they serve in order to become a member of the consortium.
But IRS expects far more than 10 percent of taxpayers to receive free electronic filing, and to persuade preparers and services to join the consortium, IRS has agreed not to compete with consortium members in providing tax preparation and filing software. The goal is for 60 percent of the 2002 tax returns, or about 78 million, to be filed for free next year.
Public access to the free service will be available on a website to be launched in January, Treasury Secretary Paul O'Neill said. Links to the service will be available through the IRS Web site and the FirstGov Web site.
With the signing of the agreement, most major tax preparers are expected to join the consortium.
President Bush has also proposed a 15-day extension for taxpayers who file electronically, including those who take advantage of the free-filing initiative. That proposal awaits approval by Congress.
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