Mass. drops its online tax-filing system, turns to commercial services

Brennan Linsley/Associated Press

Massachusetts has joined a growing number of states that have ditched their free online tax-filing system, pushing residents to use software developed by private companies, and in some cases to pay for it.

Thousands of Massachusetts taxpayers who have been submitting their state tax returns through Webfile for Income, a system in use since 2009, will this year be directed to a coalition of tax-preparation software companies instead.

Massachusetts joined the Virginia-based Free File Alliance last fall, and this marks the first full tax season that the state’s tax filers will be using the new system. State officials anticipate that Free File Alliance will save the state money and improve the security of tax returns.

The alliance offers tax- preparation software such as Intuit’s TurboTax and H&R Block’s product. The software is free for filers with incomes less than $64,000. Massachusetts revenue officials said that for this tax season, two of the companies in the alliance, Intuit and TaxHawk, are also allowing state residents with higher incomes to file for free.

But residents who don’t want to use those programs and want to file electronically will probably have to invest in commercial tax-preparation software, which can cost anywhere from $15 to more than $40.

The state decided to decommission Webfile for Income after it upgraded its tax-processing and revenue software. It’s also easier for commercial tax preparers to meet IRS security and antifraud standards, officials said.

“Massachusetts residents will qualify to file their state and federal returns together, improving security and fraud protection,” said Michael Heffernan, commissioner of revenue.

While efforts by private companies and state and federal officials have reduced tax-refund scams, they remain a significant problem. Last year, the Internal Revenue Service confirmed 787,000 fraudulent tax returns, down from 1.2 million the year before.

Webfile for Income also failed to gain a large following. Most Massachusetts residents file their returns electronically. But only about 2 percent, or 70,000, of the state’s 3.5 million taxpayers used Webfile for Income.

More states are opting to join the Free File Alliance, which counts about 22 states as members, said Tim Hugo, its executive director.

“They see it doesn’t cost the state anymore,” Hugo said. “Otherwise, the government has to do a subsidized system.”

Still, for those who did use Webfile, it was easy and free, said Tim Button, 38, of Lexington, a long-time user.

Now, Button earns more than $64,000, making him ineligible for most of the free services, He said he’s leaning toward the old-fashioned method: filing paper returns. He said he likes understanding the calculations involved and is wary of commercial providers.

“So I’ll be sending in paper forms for the first time since 2003,” he said.