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Tax season is in full swing! Again this year, the Internal Revenue Service is offering a program that allows many U.S. taxpayers to electronically file their tax returns for free.
Free File is a free federal income tax preparation and electronic filing program for eligible taxpayers, developed through a partnership between the Internal Revenue Service (IRS) and the Free File Alliance LLC, a group of private sector tax software companies. You may access free commercial online tax preparation and electronic filing services through the IRS.gov website.
Eligible taxpayers may prepare and file their federal income tax returns using commercial online software provided by the Free File Alliance companies — not the IRS. Since Free File’s debut in 2003, more than 19.2 million returns have been filed through the program saving taxpayers millions of dollars.
It’s important to note that not everyone is eligible to use Free File:
Free File is only available to taxpayers who have a 2007 Adjusted Gross Income (AGI) of $54,000 or less. Individual company offers may be limited to specific states and include other criteria. Carefully review the Free File offer criteria before selecting the company. Each participating software company sets its own eligibility requirements.
The IRS list of participating companies includes links to the available programs. Some companies have more restrictive requirements than the IRS guidelines. For example, in order to use TurboTax, you must earn $30,000 or less.
The Free File program only applies to your federal return; it does not include your state return. From my experience, though, once you’ve computed the numbers for your federal income tax forms, you can use many of them as a basis to complete your state income tax form.
This is a great deal for many people. Check into it if you haven’t done your taxes yet. For more info, read the Free File FAQ at the IRS web site.
(On a related note, Allen sent me a Consumer Reports article from 2006 that attempts to answer the question “Should you do your own taxes this year?”)
Addendum: Jim at Blueprint for Financial Prosperity dropped a line to let me know he’s posted a list of free tax preparation services.
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March 19th, 2008 at 1:10 pm
I don’t know about other states, but I know that Virginia lets you file your state taxes for free through their website. You’ll need to have your federal done first, but once you have that, it takes about five minutes.
March 19th, 2008 at 1:16 pm
Does this qualify for the self-employed or just those filing a 1040? Looked into this today on irs.gov and jut couldn’t figure that part out.
March 19th, 2008 at 1:37 pm
My girlfriend used Freefile and the experience was pretty painless and quick for her. (She needed a 1040EZ, but I think it can handle the 1040A too).
One thing they don’t tell you about Freefile: you either need to know numbers from your previous year’s return or else you still need to mail in a little authorization form via the mail.
Personally, I still prefer doing my taxes using pen and paper. However, my return took three weeks longer than my girlfriend’s to come in.
March 19th, 2008 at 1:52 pm
For those who don’t qualify for FreeFile, TaxAct is an online preparer which charges only the $17 or so to transmit your return to the IRS. Using their online software is free (vs. paying $30 or $50 for the H&R Block software, plus their $17 filing fee.)
March 19th, 2008 at 2:19 pm
It’s only a matter of time before this will be the case (I hope), but I can’t believe that it’s 2008 and it’s not possible for everyone in every state to file federal and state taxes online for free directly through the fed/state IRS.
March 19th, 2008 at 3:58 pm
Katrina:
I think it depends on which ‘free file’ company you use. Some support self-employment and others do not. You have to check out each one independently to see.
NJS:
I prefer |pencil| and paper myself. I did two returns this year, both on paper… and then because they qualified for free submission, I entered them online…
One of them turned out perfectly (as in everything matched up nicely), but the second piece of online software would NOT allow me to ‘take’ a particular itemized deduction that is allowed in our state.
I hemmed and hawed a bit over the issue, and finally just mailed in the tax return. I’ll wait the extra weeks to get the return instead of losing some double-digit amt of money to the IRS just because it’s ‘easier’.
March 19th, 2008 at 4:35 pm
thanks for the reminder JD,
I better get started on those taxes
March 20th, 2008 at 6:34 am
The first year I used Free File, I was directed to TaxAct.com. I used it to EFile my taxes, and it was great.
The next year, I went back to Free File, and found that I no longer qualified because my AGI was too high. I was disappointed and a little angry, and was preparing to file a paper return, when I decided to go to TaxAct again just to check. Turns out that while I didn’t qualify for FreeFile, I still qualified to EFile for free at TaxAct.
Most recently, I skipped the IRS site altogether and went directly to TaxAct, which this year is advertising free EFiling without any restrictions.
My point is that if you want to EFile, and don’t see why you should have to pay extra for doing something that saves the IRS the work of manually processing your return, and FreeFile says you don’t qualify, you should still look around because you may very well still be able to EFile for free.
March 20th, 2008 at 7:02 am
I had an interesting experience this year involving this. Last year I used H&R Block to do my taxes, because they openly advertised doing it for free. I go back this year, and there is no free option. The lowest I could pick was like $25 or $30. I know I qualify for the free filing, so I found the IRS website and used their link to H&R Block’s free file, and lo and behold, there’s the free filing option!
Moral of the story: Once I no longer qualify for the free filing, I’m not going to use H&R Block anymore… Hiding the fact that they even offer the free filing and requiring the direct link from IRS.gov to reach that functionality! For shame!
Also, I second Anca. I think it’s ridiculous that this entire process isn’t completely automated online for free by now.
March 20th, 2008 at 7:50 am
Use TaxAct.com. We’ve used this the last 3 years to do our taxes. It is easy and free to E-file a federal return. Each time our refund was deposited to our account within 2 - 3 weeks. We live in a state that does not have income taxes, but to file a state return costs $16.95.
March 20th, 2008 at 8:41 am
I used the freefile about a week ago to do my taxes. Ended up going to h&r block’s website to do it, was pretty painless.
March 20th, 2008 at 9:06 am
I agree with a couple of others…why on earth are we paying some third party (this year I paid $17.95) to transmit each and every return? This is gotta be a huge money maker for somebody. The way I see it, the IRS is saving a lot (probably almost $17.95) each time a return does not have to be keypunched into the system by humans, so they should be able to absorb the cost of electronic submission and still save money.
Perhaps allowing companies to charge was originally a way to offset the set-up costs (servers/software/etc.), but the economies of scale here should allow the actual cost per return to drop fairly quickly. I believe that at $17.95 per transmission, we are getting ripped off. I will probably go back to submitting paper returns in protest until the price drops.
- K.
March 20th, 2008 at 10:28 am
Several people have cited TaxAct as a good company and I am here to agree.
I started with TaxAct in 2001 or 2002 because they offered a free program. Two years later I paid up the small charge which is well worth it since the program will automatically load all that info from the previous year’s filing. For about $12 and no efiling charge it is the best deal around!
March 20th, 2008 at 10:29 am
For the benefit of GRSers from the Land of Lincoln: Illinois offers a free e-file for state income tax.
Start at Illinois IRS website: http://tax.illinois.gov/
Cheers,
Gan
March 20th, 2008 at 10:31 am
I just filed yesterday for free by going directly to the TurboTax web site. There is no income limitation, but if you need specific tips/guidance, them prompt you to pay for it. I use the 1040, am married with one child and itemize typical deductions such as mortgage interest, property and local income taxes, charitable contributions, etc. The prep is free and the e-file is free too! What a deal!
March 20th, 2008 at 12:17 pm
@Rondondo:
The only way you received free efiling from Turbotax is if you are below the AGI limit where the IRS allows you to efile for free. Any and all of the tax prep software allows for free filing under these circumstances. For those of us above that AGI limit Turbo tax is one of the priciest packages around.
I also vote for TaxAct….way cheaper than the big tax prep guys and just as good (turbotax, HR block).
It also blows my mind that I can send the IRS a paper copy of my tax return for 41 cents but it costs me 18 bucks (how much is it anyway?) to efile….
March 21st, 2008 at 5:12 am
turbotax now has a free version. no income level requirements.