[TAXES] Free Tax Filing Options

Category: Finance

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, 2017. 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:

Free Tax Software

  • Adjusted Gross Income: $33,000 or less, or
  • Eligible for the Earned Income Tax Credit

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. TurboxTax also offers free federal and state tax filing for members of the U.S. military with ranks E1-E5.

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 $52,000 or less, and be 56 or younger. (For active military the income requirement is $64,000 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.

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 Help Me Find Free File Software 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 15 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 taxes done this year? Post your comment or question below...

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Most recent comments on "[TAXES] Free Tax Filing Options"

Posted by:

16 Feb 2017

I've used the paid-for version of TurboTax for many years, without problems, but this year they made "audit protection" mandatory (no way to opt-out when you're e-filing). And naturally they put it right at the final step when the customer is set to hit "finish"! After paying $80 for the DVD, I guess they figure they've got us by the gonads, so why not get a few more bucks. But after many years, they've "gotten" me for the last time!

Posted by:

16 Feb 2017

After years of using TaxAct, they decided to raise the price on their Deluxe version. I ended up using the free software from Credit Karma. I found it to be user friendly and absolutely free as promised. I've just received my refund!

Posted by:

16 Feb 2017

I used TaxAct this year as I have for the past few years. Since Florida doesn't have an income tax, I only need to file a Federal return. And for $10.50, it is worth it to me since it imports information from the previous year and is a big time saver. They also offer a "audit defense" option, but it isn't mandatory.

Posted by:

16 Feb 2017

Had Enough???? Get the book that can set you free... Super SCAM..megafraud in the misapplication of the income/excise tax, by C. Fenner Goldsborough. I hope they can keep up with the traffic. and no, it's not just another scheme, through listed S.C. and other decisions and research you will prove to yourself that the average working stiff is not made liable or required to file!!!!! Lawyers and accountants have a vested interest in you not knowing the truth due to the fact that they make a good living off of it... or it is possible they just believe their training and what the IRS tells them to believe. Go to the website and order the book, read, and decide yourself... Website: www.super-scam.com

Posted by:

16 Feb 2017

Looks like a good resource - have learned a lot. I have used one supplier and mailed a printed copy - checks my math and records in proper blocks.

Posted by:

16 Feb 2017

The book Ronald refers to should be titled "How To Forfeit Your Property With No Effort". Yes I am an accountant, and yes I make a decent living doing it. I am NOT hiding the truth, which is that if you do not file and pay your taxes according to US law you will be fighting both the IRS and you state tax authorities. They will first of all levy your bank accounts, then seize your property to satisfy what THEY have determined you owe since you did not file and claim whatever dependents and deductions you had a right to. Your only recourse will be to fight in Tax Court and NO one has ever won one of these frivolous cases. So, buy the book. It may be the only possession you are left with when the dust settles!

Posted by:

16 Feb 2017

I used Credit Karma.
It was easy peasy and they filed both my federal and state electronically.

Posted by:

16 Feb 2017

Have used Free tax USA for 5 years. Easy and they import previous year's info which speeds up the process. Never a problem and refund within timeframe posted.

Posted by:

16 Feb 2017

I just do mine on the IRS pdf and then mail them in.

Posted by:

16 Feb 2017

Found my local library does taxes provided by knowledgeable, trained & licensed by the IRS people and funded by AARP. No membership needed and all welcome. Saved me money and best of all free. Wish I had heard of them years ago! Found me some deductions that H&R missed last year.

Posted by:

16 Feb 2017

Beancounter -- you hit the nail on the head. The book recommended by Ronald espouses a bone-headed theory that has been rejected by every court I can find since 1913. The US Constitution specifically provides that the government can tax incomes -- the 16th Amendment only removed any restriction based upon "direct taxation." If you want a bit more detail, Google "Sixteenth Amendment" and read the Wikipedia article(s).

I have been an attorney for more than 50 years (now retired), and one of my areas of expertise was taxes. Some years ago, a fairly wealthy client came to me and reported that he had attended a seminar and there learned that the feds were illegally taxing his income -- they told him that all he had to so was file a "zero" tax form 1040, thus meeting the requirement to file, and he was home free (he said). And, he said he was going to do just that. "Get another lawyer and CPA," we both told him. So he grudgingly filed properly. Several years later, all those who had sponsored his expensive seminar were arrested and convicted of evading federal income taxes. It was my pleasure to show him the newspaper articles and remind him of the great advice the CPA and I had given him.

Posted by:

Bob Sanders
16 Feb 2017

I have used TaxACT for 5 or 6 years. Before that I used TaxCUT. I am very skeptical about storing my tax info on their unknown server. I assume (like most others) they have a secure server, but how secure are they??? I always buy the program, fill it out on my personal computer, and then file thru TaxACT. Yes, I pay for it but for $30 I sleeep well at night (at least on this subject :-))

Posted by:

17 Feb 2017

Thanks for the article. Just what I needed.
I'm going to attempt to do my own taxes for the first time, so it's good to know I can try and compare them without filing.

Posted by:

17 Feb 2017

Just so you know, AARP Tax-Aide does not have an age limit

Posted by:

18 Feb 2017

If your income is moderate, and you don't believe you can file taxes yourself, or you don't want to learn how, you can use VITA or AARP to help. I've tried many of the commercial programs, and TurboTax is the best paid that I've found. If you wait until they are on sale, you can get them at a discount. It really depends on the complexity of your situation, and how much time you want to devote to learning. You will be doing this for the rest of your life, and who has more interest in making sure you conduct your life to lower your taxes legally than you? (forget electronic filing- let them work to audit you, and help the paper industry and tree farmers at the same time!). It really makes me concerned when people are happy to have their taxes filed, and get a big refund. They love the IRS? The IRS isn't giving you a big check to go on vacation- they are returning money that your employer deducted from your salary and kept from you all year! What a scheme! If everyone had to pay the taxes they owed at the end of the year, we really would see protests and marches. And maybe some much needed tax reform and simplification.

Posted by:

20 Feb 2017

Interesting article. I've been doing my own taxes since 1960. Used to use Turbo Tax. Gave up on them many years ago. Have been using Free Tax USA the last five years. Very good. Looked @ the free tax offered by Karma. Not sure which is better other than Karma absolutely free. Free Tax USA charges for state. One thing I feel is missing from them all is the ability to see your Modified AGI. That is was Obama Care uses to determine a person's health care premium tax credit. I found this out the hard way. In 2014 and 2015, I received an IRS notice telling me that, based upon my MAGI, I received too much PTC and had to repay that. 2014 was over $2000 and 2015 almost $2000. The PTC that I did receive is what my state exchange (Covered Calif.) said I was entitled to based upon my income. Sad way to go, thinking your doing everything right but the government says "ain't so".
Haven't decided on which service to use yet.

Posted by:

23 Feb 2017

I've used FreeTaxUSA two years now, and I prefer it to TurboTax. And its free. Filing the federal form electronically is free, too. Electronically filing the state costs $12.00. It's at FreeTaxUSA.com

Posted by:

Keith H
01 Mar 2017

Will you please comment on "Credit Karma" tax program/software?


Posted by:

08 Mar 2017

Unfortunately, I haven't been able to file for the previous two years and tax year 2016 will be the third. Maybe President Trump will fix this problem. Let me explain: The state I live in, Ohio, passed an amendment to our State Constitution in 2011 preventing any State or Federal government from imposing a penalty such as a "Shared Responsibility Payment" on any of Ohio's citizens if they don't purchase health insurance or qualify for an exemption, which I do not.

Here it is for all to read:

I.21 Preservation of the freedom to choose health care and health care coverage
(A) No federal, state, or local law or rule shall compel, directly or indirectly, any person, employer, or health care provider to participate in a health care system.
(B) No federal, state, or local law or rule shall prohibit the purchase or sale of health care or health insurance.
(C) No federal, state, or local law or rule shall impose a penalty or fine for the sale or purchase of health care or health insurance.
(D) This section does not affect laws or rules in effect as of March 19, 2010; affect which services a health care provider or hospital is required to perform or provide; affect terms and conditions of government employment; or affect any laws calculated to deter fraud or punish wrongdoing in the health care industry.
(E) As used in this Section,
(1) "Compel" includes the levying of penalties or fines.
(2) "Health care system" means any public or private entity or program whose function or purpose includes the management of, processing of, enrollment of individuals for, or payment for, in full or in part, health care services, health care data, or health care information for its participants.
(3) "Penalty or fine" means any civil or criminal penalty or fine, tax, salary or wage withholding or surcharge or any named fee established by law or rule by a government established, created, or controlled agency that is used to punish or discourage the exercise of rights protected under this section.
(Adopted 12-9-11; Proposed by Initiative Petition)

Follow this link to search it yourself:

Since I haven't purchased health insurance (nor do I currently plan to) since the instructions for Form 1040 were changed to include the requirement for taxpayers to pay the Shared Responsibility penalty payment, if I were to self assess the penalty on the form and SIGN the document, (under penalties of perjury, mind you) I would be giving up my state right NOT to have to pay the penalty. If I lie, and mark on the form that I did indeed have full-year coverage for this tax year and SIGN the document, I would be knowingly lying on the form (again, under penalties of perjury).

So, I'm left with three choices:

1) I can perjur myself by lying, stating that I had full coverage, signing the document and filing it,
2) I can self assess the shared responsibility payment, sign the document, filing it and give up my state right, or
3) I can do neither of the above by simply not filing a return and wait for the IRS to "come get me", which as of yet, they have not.

Brian J. Strohmeyer
Citizen of the State of Ohio,
6th Congressional District

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