The plan was immediately praised by tax preparers and tax software publishers, which had feared that the government drive toward free online filing would bring the Internal Revenue Service directly into their line of work.
Instead, the plan envisions formation of a consortium composed of dozens of private companies to handle both preparation and online filing.
Ed Black, president and chief executive officer of the Computer and Communications Industry Association, said the agreement "represents the best in what the government and private sector can achieve when working in concert."
Under the plan, each tax-preparation provider in the consortium must provide free services to at least 10 percent of taxpayers it serves. Exactly which taxpayers qualify would be up to the individual provider, but the services would all be available beginning Dec. 31 through the IRS Web site.
The goal is for 60 percent of tax returns to be filed for free next year, which translates to about 78 million, according to Treasury Department officials. Now, taxpayers usually pay a fee, averaging $12.50, for online filing -- and that's on top of fees for preparation services or computer software.
This year, 46.5 million taxpayers filed their returns electronically, out of a total of 125.6 million received.
Treasury Secretary Paul O'Neill and White House Budget Director Mitch Daniels jointly announced the plan, which will be subject to change after a 30-day comment period.
"Paying taxes is burden enough; it's our duty to do anything we can to make the process simpler and fairer," Daniels said.
Congress has set the IRS a goal of having 80 percent of returns electronically filed by 2007. IRS Commissioner Charles Rossotti said taxpayers who e-file get their refunds twice as fast, make fewer errors and help cut down government paperwork and costs.
President Bush has also asked Congress to give taxpayers who e-file an extra 15 days to get their returns to the IRS, but lawmakers have yet to act on it.
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