Update 12/10/2008: Edited third paragraph with news about TaxCut for tax year 2008 pricing policy.
Update 11/24/2008: Thanks to reader comments to this blog post (see below), I have additional information from the TurboTax web site regarding the TurboTax e-file policy: the cost of TurboTax includes one e-file and print for one federal tax return. Additional fees apply for preparing additional federal returns ($9.95) and for e-filing state returns ($17.95 - but TurboTax Deluxe and higher includes one state return).
This info takes some of the steam out of the "good news" about TurboTax removing fees for filing tax returns electronically. Wayne Hinkel posted a comment saying that he thinks TurboTax will "reverse this inane policy within a month or so" to avoid losing customers. I hope he's right.
TaxCut tax prep software includes e-files fees for
one 5 federal returns and 1 state tax return, but TurboTax will set you back $60-$100, depending on the version you choose while TaxCut runs from $50 - $80 for comparable versions at a slightly lower cost.
Intuit announced that it will be eliminating the e-filing fees from the next release TurboTax, which will be TurboTax for tax year 2008. I would expect this to release late in November or early in December.
The IRS doesn't charge for e-filing, but many tax software packages have been charging for this service. I can understand some small fee to cover bandwidth if processing had to be done in Intuit's infrastructure, but in recent years, both TurboTax and TaxCut had e-filing fees that were clearly designed to pull in profits, with a cost of over $15 per efiling last year (state and federal, separately). Profits are a good thing, but gouging the customer is not.
TurboTax is the strongest player in the world of tax software. Removing the e-file fee is great for the consumer and it's great for Intuit's business.