[TAX PREP] Free Tax Filing Options
The good news is: about 70% of U.S. taxpayers can get free online tax preparation and e-filing this year. The bad news is: you have to pick your online tax service very carefully. Here's what you need to know...
Options for Free Tax Return Preparation
Dozens of firms now offer free online tax preparation and e-filing. It’s not just for simple, wage-only taxpayers anymore; full 1040 returns with all schedules and worksheets can be prepared and filed online for free, prior to the tax filing deadline of Tuesday, April 18th, 2018. But there are a few caveats.
Most people with an adjusted gross income of $64,000 or less can get free online tax preparation software and e-filing, through a participating IRS Free File provider. However, the multitude of offers has more rules, exceptions, and confusions than cellular phone service contracts.
For example, here are qualifications for TurboTax’s Freedom Edition that offers both Federal and State tax prep for free:
- Adjusted Gross Income: $33,000 or less, and
- Eligible for the Earned Income Tax Credit, or
- Active military with adjusted gross income of $66,000 or less
Don't confuse the "TurboTax Freedom Edition" product with "TurboTax Federal Free Edition". They have similar names but are quite different. Freedom Edition is geared towards lower-income filers (regardless of tax return complexity) and is offered through the IRS Free File Alliance (FFA) program. State returns are free and no upgrades are available.
TurboTax Federal Free Edition (also called AbsoluteZero) has no income limits, and also offers free State returns, but is intended only for very simple returns that can be filed on form 1040EZ or 1040A. This version lets you take a picture of your W-2 with a smartphone, and will automatically import that info into your return. Various paid upgrades are available for those who itemize deductions, have investments or rental property, and for business owners.
With H&R Block's Free Edition (also called More Zero) both Federal and State returns are free. In contrast to the TurboTax offering above, H&R Block's freebie can be used by filers with mortgages and itemized deductions. They also have the same easy W2 import features.
TaxAct FreeFile offers free federal and state returns, but you must have an adjusted gross income of $53,000 or less, and be 56 or younger. (For active military the income requirement is $66,000 or less.)
FreeTaxUSA Free Edition has no income or age restrictions, and supports even complex returns. If you own a home, are self-employed, or have investment income, FreeTaxUSA has you covered for the Federal return. State returns cost $12.95 extra. If you used as different program last year, FreeTaxUSA can import your information from TurboTax, H&R Block, or TaxAct.
Credit Karma is one of those sites that helps you monitor your credit score, but they also offer free tax preparation for both federal and state returns. It's easy to import the previous year's return if you filed with H&R Block, TurboTax or TaxAct, and tax specialists are available to help with your tax questions at no charge.
Canadians can use SimpleTax, a CRA-certified and web-based tax prep service that lets you pay what you want, or pay nothing.
Choosing a Free Online Tax Service: The IRS Wants to Help!
Is your tax situation simple or complex? Should you file Form 1040 (the long form) or use the short form 1040-EZ or 1040A? It depends on your marital status, dependents, income, deductions, and a few other factors. The IRS has a guide to figuring out which form suits your needs.
The IRS devoutly prays that you will file electronically (much easier to audit your return that way), so it makes a pretty good effort to help taxpayers find a compatible online tax preparation and filing service. Just hop over to the agency’s Free File Software Lookup Tool page and answer six simple questions.
Beyond finding a service that will do the Federal and State returns you need for as little money as possible (ideally, free), it’s impossible to say whether one online tax service will save you more money than another. Each has a unique approach to “interviewing” filers, asking different questions in different ways to elicit data about deductions, credits, and so on. A taxpayer’s answers may differ depending on how a qualifying question is asked. So you may get different results (for example) from TurboTax than you will get from H&R Block.
Thanks to the power of “free,” you could try multiple online tax services and actually e-file with the one that yields the most favorable answer. But that would be like having multiple teeth drilled for free and filling the one that hurts the most. If your tax situation isn’t very complicated, then any variance between online services should be negligible. Look for one that offers free Federal and State returns and e-filing.
The Do-It-Yourself Option
If your income or age disqualifies you from using one of the free online tax prep services, you can still get free tax software in the form of FreeFile Fillable Forms. These online versions of every IRS form won’t give you advice or hold your hand; you need to know what forms you need. On the other hand, if you know your tax situation well then you don’t need to waste time on all the hand-holding that novice-oriented tax programs provide.
These forms are “intelligent” in that they can perform basic math, e. g., totaling all of the lines of data you enter in a form, multiplying dependents by exemption amount, etc. But they don’t offer advice and explanations as the pricey programs do. This seems like a good option if your job and financial situation hasn't changed since last year. Just look at last year's tax return, see which forms you filed, and you should be good to go.
The AARP Foundation Tax-Aide program offers free tax preparation to people 50 and older, even if you're not an AARP member. Tax-Aide has more than 5,000 locations in neighborhood libraries, malls, banks, community centers and senior centers, staffed with IRS-certified volunteers who will assist with your returns.
There are still many taxpayers who haul shoeboxes full of receipts to a tax preparer’s office, and there may be a handful who still struggle with paper and pencil five minutes before the April tax return filing deadline. But the majority of Americans now do their own taxes using software, and for the savvy ones there is no need to pay for tax software. That said, if you have a complicated return or you own a small business, a competent CPA or professional tax preparer may end up saving you money, even if you have to pay for their services.
How will you get your tax preparation done this year? Post your comment or question below...
This article was posted by Bob Rankin on 2 Mar 2018
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Article information: AskBobRankin -- [TAX PREP] Free Tax Filing Options (Posted: 2 Mar 2018)
Copyright © 2005 - Bob Rankin - All Rights Reserved