70% Qualify for Free 1040 Software

People with an income up to almost $50,000 will get free access to tax return preparation software, the Internal Revenue Service said Tuesday.

That means 70 percent of taxpayers can prepare their taxes for free using software available through the IRS Web site — www.irs.gov Still, that is fewer taxpayers than last year, when several private companies decided to offer free return preparation to everyone.

Under an agreement that extends a partnership between the IRS and private software companies for four years, taxpayers with an income less than $49,582 can use the service next year. Companies can set qualifications for access, as long as it includes that income cap.

The agreement lets the companies market refund anticipation loans to customers who use free software. The product allows customers to get immediate access to cash through a loan that is paid off when a tax refund arrives.

Companies participating in the program must give consumers the ability to opt out of getting any refund anticipation loan marketing information. If consumers do consider a loan, the software companies must clearly disclose their interest rates and costs.

IRS Commissioner Mark Everson said that gives consumers important new protections. “We think this is a constructive step forward,” he said.

Some consumer groups have criticized the loans as too costly to lower-income taxpayers who often don’t understand the expense and structure of the loans.

Bert DuMars, IRS director of electronic tax administration, said the agency expects many of the 3 million people who used to file their taxes by telephone — an option the IRS no longer allows — will take advantage of the free filing program.

More than 5 million taxpayers used the free tax preparation software this year.