How does TaxAct and similar services make money?

[matthew1234]

Hi

Over the past few years I used free/cheap tax return services, particularly TaxAct, which is very popular among those who want to save money hiring a tax preparer.

The service is excellent, however I'm wondering how these companies actually make money and whether or not it is safe to continue using them.

For example, from what I heard social networks such as Facebook is collecting data from people and then will sell the data in the future... that is their business model. Perhaps I misunderstood, but I don't think so.

Are these free tax return service the same? Will they sell our personal information in the future?

Thoughts?

Thank you.

[irmanator]

well in NY they charge 12.95 for the state return. I wonder if they arent subsidized by the gov't since they -the gov't want us to file electronically. Probably since they get millions of ppl to use it at 12.95 plus if you want to let them take the 12.95 out of your refund as opposed to paying upfront, they charge like 14.95 Plus every other page has a warning about either benifits to the upgraged service for a fee, or electronic storage for so many years, (you have to print all the copies you want before oct. currently). So they have ways to make money.

[GrimJack]

Like irmanator said, they charge for state taxes; add to that the hope that when you make too much for free filing, you will stick with them; last but not least, if they didn't most people would just use the Federal free file and do their state taxes on their own.

The free file did not get serious until the IRS started offering their own free filing so they started claiming 'unfair competition - oh, and we will file you for free and do your state'

[SnoopyCool]

Only the basic is free. So by the time one realizes s/he doesn't qualify for a free return, s/he already spent 75 hours inputting info into the software. By that time, you just pay the fee and move on.

I believe you must also pay for prior year copies of your tax returns, along with state tax returns.

As an aside, I know that HRB is fighting an anti-trust suit with the DoJ for trying to acquire 2SS Holdings (the makers of TaxAct). Will be interesting to see how that plays out.