Puzzling over why some income tax services are free, for everyone

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The era of doing your taxes for free is taking hold. This year, there are four online offerings with Canada Revenue Agency Netfile approval where you can fill in your tax information for free without income restrictions. There are also four approved pieces of software.

With the online versions, you fill in the blanks using a web browser and your information is stored on someone else’s computer. With the software programs, you download and install them on your computer, and your information is stored on your hard drive until you send it off to the Canada Revenue Agency.

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Plus, there’s a pile of other online and downloadable services where it’s free if you meet certain conditions, such as being a student or having an income below $20,000.

There is, of course, need for a little suspicion when something is offered for free. What’s the catch? How do they make a living if they give away their product? It’s nice to have a sense of what's going on when you’re interacting with something that’s capturing your personal information.

These are the four free unrestricted online services, as listed by Canada Revenue Agency:

SimpleTax, produced by three partners in Vancouver, is clear about its business model. They’d like you to donate whatever you feel is appropriate. The suggested amounts are $5, $10, $20 and $40. But you can also pay nothing, and everything works. That approach has been successful enough to have them come back for a third year. Quote from their website: “There are no income limits or restrictions and you pay what you want, including zero. While we hope you’ll support us if you can afford it, the choice is yours.”
Website is here: https://simpletax.ca

AdvTax greets you with a screen full of small type. Amid all that type, I couldn’t find an explanation for why it’s free. The makers emphasize that if you have all your information at hand, you can do your taxes in a few minutes by filling in a series of forms that are similar to their printed counterparts. Quote from website: “Almost anyone can complete tax preparation within 5 minutes. . . . Completely FREE for Canadian taxpayers to use AdvTax NETFILE to online submit tax year 2014 return.” English, French and Chinese versions are available.
Website is here: http://www.aclasssoft.com

H&R Block is the biggest name to offer a service that is free and not restricted by income level or, to a certain degree, tax complexity. But it’s also not immediately clear why it’s free. H&R Block poses the question on its website this way: “Why are you giving away free online tax software when nobody else is?” And answers with this: “We all know that we have to pay for the tax expertise we receive when we see a tax professional or an accountant, but we believe that if you’re doing your taxes yourself, it should be free.” Which doesn’t quite answer the question. (Also, the question isn’t quite accurate; there are three other free online services. But, it could be argued that they aren’t free because two of them ask for donations.)

H&R Block appears to be offering its free service so that it can upsell and assemble a mailing list of potential customers. During the sign-up process, you have the option of checking a checkbox for this: “Yes, I’d like to receive important information by email from H&R Block about software updates and special offers.”

When you’re almost finished filling out your tax information, you get a pitch for additional services that cost money:
Tax protection - personalized support if your return is audited or reviewed, $9.99 per return
Remote tax pro review - expert support from the comfort of home, $34.99 all returns
In-person tax pro review, $59.99 per return

Website is here: https://www.hrblock.ca/online-tax-software/get-started/

The fourth free online service is easyCTAX. There is no explanation for why the service is free, but there’s a low-key link to its developer, New Rainbow Inc., which describes itself as an information technology consulting company. Quote from website: “Free to everyone, no matter how much family income is!” But, confusingly, under a link labelled “Refund Policy”, there’s this: “Users are not expected to pay for the software or online service until they are completely satisified.”
Website is here: http://www.easyctax.com/individualtax/en/index.html

Since I opted to do my taxes with one of the free online services, I haven’t explored the downloadable programs much. After checking demos of the online versions, I used SimpleTax because it was the least confusing, puts everything on a single page so that I can review the big picture by scrolling, and is attractively laid out. Being in an attractive place while doing your taxes is worthwhile. With developers based in Vancouver, SimpleTax is also almost local. I was pleased enough to make a donation.

Here’s Canada Revenue Agency's list of free downloadable income tax software, with quotes from their websites:

StudioTax for Mac and Windows (separate programs)
http://www.studiotax.com/
Based in Ottawa, Ont.
“We receive no government or private funds. We mostly run on the few donations we get.”
“We are a small group of software development professionals working in various areas of the high tech industry in the Ottawa area.”

easyCTAX Windows
http://www.easyctax.com/individualtax/en/index.html
Based in Mississauga, Ont.
“Both on-line and download version are completely free to everyone, no matter how much your family income is.”

GenuTax Standard for Windows
http://www.genutax.ca
Based in Grande Prairie, Alta.
“... we ask that you make a modest donation to support costs associated with the continued development of GenuTax Standard software”
Suggested donations of $20, $30, $40.

TurboTax Free Forms for Windows
http://turbotax.intuit.ca/products/free-forms/index.jsp?src=oth&cnm=oth_fy15_ttd_e_crafreeforms
Based in Mississauga, Ont.
“Yes — TurboTax Free Forms is completely free. At no time will you be asked for payment or a donation. Guaranteed.”
“Need more step-by-step guidance? Find the TurboTax Edition that is right for you. Starting at $9.99”

Canada Revenue Agency’s overview of tax services that it has approved for Netfile is here.

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Maybe we should do away with income tax returns, since the federal government already has much of our financial information. Editorial in the Times Colonist: Do away with the hated income tax return

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