Paying for access to a rightfully owed refund has frustrated taxpayers for ages. The Free File Alliance, a voluntary coalition of private-sector tax-preparation software companies partnered with the IRS, is changing that for select taxpayers. The program is igniting a dramatic upswing in online tax payments that is digitally transforming the national tax culture.

Stephen Ryan, general counsel to the Free File Alliance, helped legally craft an agreement between the companies and the IRS resulting in more than 15.4 million taxpayers computing and filing their tax returns online for free. Developed during 2002, the program debuted in 2003, but has changed eligibility requirements each year. The 2007 requirement will allow an estimated 95 million taxpayers earning an adjusted gross income of $52,000 or less to utilize the program.

"This unique partnership between government and private-sector companies provides very real and significant benefits to poor and disadvantaged taxpayers," Ryan said in a statement. "It also keeps government out of tax preparation, protecting taxpayer privacy and promoting private-sector innovation and competition."

A 2006 IRS survey said taxpayers who used the program reported an overwhelming level of satisfaction with it. According to the survey, 94 percent said they intend to use Free File again next year, 94 percent said they found it very easy or somewhat easy to use, and 97 percent said they would recommend Free File to others. Convenience, not the free cost, was the most appealing factor of Free File, according to the study.

The initiative coincides with the IRS's 1998 goal of transitioning 80 percent of American taxpayers to the e-filing method by 2007. In 2001, President Bush increased pressure on that goal with the 24 e-government initiatives he established through the Office of Management and Budget's Quicksilver Task Force. The president's agenda included a dramatic increase in e-filing. The Free File Alliance's current eligibility requirement will include 70 percent of American taxpayers.

The program only includes federal taxes, but has led to similar programs in states, including Mississippi and Idaho.

Andy Opsahl  |  Features Editor