(MIAMI) 11-16-2007 - A new federal class action lawsuit filed against income tax preparation soft ware firms alleges the companies charged excessive e-filing fees totaling as much as $1 billion. Plaintiff firm Feldman Shepherd Wohlgelernter Tanner & Weinstock filed the suit Monday in the U.S. District Court for the Eastern District of Pennsylvania on behalf of Philadelphia resident Stacie Byers against members of an income tax software group, Free File Alliance. The suit, Byers v. Intuit Inc., alleges group members, such as H&R Block and Intuit, ille gally charged millions of U.S. taxpayers excessive e-filing fees. The complaint was brought under the Federal User Charge Statute and alleges the alliance members charged fees solely based on their private business interests and not on the value to the taxpayer and the public policy interest served. The sole count of the complaint was for restitution of fees charged for electronic tax filing in violation of the Independent Offices Appropriation Act. The complaint alleges the IRS contracted with Free File Alliance to collect e-filed federal tax returns on its behalf. The agreement the IRS made with the alliance was sup posed to provide free e-filing of tax returns to 70 percent of Americans, the firm said. Only 3.8 million taxpayers filed their returns for free in 2006, and, in 2007, only families with adjusted gross income of less than $52,000 qualified for free filing, the firm alleged. The name 'Free File Alliance' is clearly misleading," Feldman Shepherd attorney Thomas More Marrone said in a statement. Tew taxpayers are actually eligible for free electronic filing. E-filing has become an enor mous profit center for cartel members." Marrone said in an interview that the class members would be e-filers who made more than $52,000, which has the potential for more than 70 million class members. The suit is against Free File Alliance as defendant class as well as some of its members H&R Block, Intuit and H&R Block Digital Tax Solutions. Marrone said the government has encouraged taxpayers to file electronically for faster processing and returns, but there is no way to do so other than through a group member. This agreement wrongfully 'privatized' the IRS1 quintessential government task of developing, receiving, collecting and processing tax returns, allowing [alliance] members to reap profits by charging taxpayers and tax preparers substantial and legally unauthorized fees to electronically filed returns with the IRS," the complaint alleges. Marrone said the proposed class calls into question all fees associated with e-filing, including the fees to file and the cost of purchasing the software for tax return preparation. The actual cost to the IRS for e-filing because of the savings from e-filers is "either nothing or next to nothing," Marrone said. Those who don't qualify for free filing have to purchase software to file.

Related Information:

• Lawsuit accuses tax preparers of overcharging (PDF)