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Tax Software Changes Aid Check-Off

When H&R Block reviewed the 2003 version of TaxCut, its tax-preparation software package, company officials worried that some filers might be confused by the option to designate money to the Presidential Election Campaign Fund.

“We thought that users might assume that the $3 was coming out of their tax refund,” said Tom Linafelt, communications manager for H&R Block/Digital Tax Solutions.

To avoid any misunderstanding, the company reworded the question in its 2004 software, inserting a disclaimer that “checking the box will not change your tax or reduce your refund,” Linafelt said.

This slight change in wording could have a dramatic effect on the taxpayer check-off system for public funding of presidential campaigns — or at least that’s what some campaign finance advocates think.

Under the check-off system, taxpayers who check “yes” do not, in fact, give up any of their own money. Instead, for every “yes” box checked, $3 of federal funds are earmarked to pay for general election grants, primary matching funds and grants to the parties for their national conventions, as has been done in every presidential campaign since 1976.

Today, only 10 percent of Americans participate in the check-off system for public funding of presidential campaigns, compared to 20 percent in the late 1970s and 1980s. Many experts say the check-off is in crisis, in part because of a lack of education about how the system actually works.

Steve Weissman, associate director of policy at the Campaign Finance Institute, said H&R Block’s move is a sign of “major progress” and a good example of the sort of efforts that electronic filing software providers can make to improve the public’s understanding of the check-off.

Weissman and his colleagues at CFI have been actively pushing companies like H&R Block and Intuit, which sells TurboTax, to improve their explanations for more than a year.

As an increasing number of filers use professional accountants or file electronically, check-offs are declining, according to a CFI report issued last week.

The “main electronic filing software used by an already large and rapidly growing number of taxpayers discourages participation in the checkoff by (a) automatically filling in the ‘No’ answer to the checkoff, (b) using words like ‘contribute’ which imply falsely that checking the box will cost the taxpayer $3, and (c) providing inadequate explanations of the purposes of the checkoff,” the report stated.

A review of various software packages available to the public showed that even different products released by the same company can vary widely in how they depict the check-off system.

For instance, Intuit’s TurboTax Basic asks filers: “Do you want $3 to be contributed to a fund that provides campaign money to presidential candidates?” even though the software notes that “selecting ‘yes’ will not increase your taxes or reduce your refund.” If a taxpayer does not select “yes,” the program automatically defaults to “no.”

But TurboTax’s EZ program merely asks users to check a box that says: “I want $3 to go to the presidential election campaign fund. If checked, your tax refund will not change.”

Julie Miller, a senior manager for corporate communications with Intuit, explained the differences as a product of the design process.

“The only reason they’re different is they’re different products and we have different people working on them and writing the different interview screens,” Miller said.

But Weissman believes such discrepancies generate too much confusion and lend to common misconceptions about the check-off program. He thinks the government should ultimately weigh in on the controversy.

“This all shows the absolute need for some kind of uniformity and the [Internal Revenue Service] to take a stand and clarify this issue,” Weissman said.

While it is unclear exactly how many consumers use electronic software each year for their taxes, H&R Block projects that 20 million to 25 million returns will be completed using software programs in 2005, with about 10 million returns completed using Web-based tax software.

Linafelt said the changes had nothing to do with the comments of CFI — or those on the other side who disagree with public financing.

“We’ve been criticized by both sides of the issue,” Linafelt said. “We are trying to be as apolitical as possible,” he added. “We want everybody to buy our products.”

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