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Every tax preparation service we’ve reviewed this year offers a version that allows you to prepare and file at least your federal taxes for free. The thing is, though, most of these tax site’s free versions only support the W-2 and a few additional tax topics like the Earned Income Tax Credit (EITC), some education expenses, and retirement income. If you are self-employed, have a side gig like driving for Uber or Lyft, or need to report capital gains or rental income, for example, you’ll have to pay for your prep. Some, like TurboTax and Tax Act, include unemployment income, which millions more taxpayers will need to report this year.
Even if you have a full-time job with a company that issues a W-2 and you drive for Uber occasionally on the side, you may well have to pony up for the most expensive version of these services, which, in the case of TurboTax, costs $120 for federal filing plus $50 for state (early filing promotional prices are in effect at this writing).
There are other options, though. FreeTaxUSA supports all major IRS forms and schedules. If you don’t have to file a state return, you can get by for free. Preparation and filing for state returns, though, costs $14.99. Credit Karma Tax is totally free for both federal and state, and you can file a return that requires even the most complex forms and schedules using it. What you don’t get with these two is advanced taxpayer guidance and state-of-the-art user experiences. H&R Block Self-Employed is slightly less expensive ($109.99 for federal and $36.99 for state).
The IRS Free File Program
Most of the free tax prep solutions offered by companies like H&R Block that make multiple editions don’t have limits based on income. Rather, you pay by the complexity of your tax return and the tax topics each version covers. It doesn’t matter how much money you make.
If your adjusted gross income (AGI) is $72,000 or less, but your tax-related issues are advanced (self-employment and capital gains), though, you may qualify for the IRS Free File program. This is a partnership between the IRS and the Free File Alliance, an industry group that consists of the major personal tax preparation solution providers like TurboTax and several others. The services look and work the same whether you’re a paid subscriber or you came in through IRS Free File, because you’re actually using the same products. You’re just not being charged for them. But you can only use the company’s free customer service options.
These services support the 1040 and the most-commonly filed tax documents (including Schedules A-E). Each company in the Free File Alliance offers multiple versions of their products, each of which supports a specific group of tax topics. You’ll be able to tell which version you need.
There are two ways to find a solution that suits you. One way is to use the Free File Online Lookup Tool. This site asks you a few questions and then makes recommendations. Or, you can browse through the list of available web-based software to see the requirements for each.
The requirement that you have an AGI of $72,000 or lower to qualify for IRS Free File isn’t true across the board, but it does apply to most sites if you are an active member of the military. Other sites have requirements related to your age and the state in which you reside. The income levels vary, too. Here are some examples of what you’ll find:
- TurboTax: AGI of $39,000 or less (any age) or eligible for the Earned Income Tax Credit or active military with AGI of $69,000 or less.
- TaxAct: AGI of $63,000 or less and age 56 or younger or eligible for the Earned Income Tax Credit or active military with AGI of $69,000 or less.
- TaxSlayer: AGI of $72,000 or less and age 51 or younger, or eligible for the EITC, or active military with AGI of $72,000 or less.
Note that H&R Block is no longer a member of the Free File Alliance.
Free Fillable Forms
If your AGI is more than $72,000, you can still use the IRS online Fillable Forms. This is not commercial software like TurboTax. They’re simply web-based forms that you can complete on your own. You can’t file state tax returns using this option, but here is a list of the forms and schedules you can submit. The IRS recommends that you look at this list carefully before you start working on the Fillable Forms, as even some of the allowed forms have limitations.
You should also consider the other potential drawbacks listed below.
- You have to know what you’re doing. Taxpayer guidance is very basic, really just short line-by-line instructions that are not anywhere near as robust as on the commercial tax sites.
- You may actually have to manually write in some supporting information.
- You must have your 2019 return available in order to file your 2020 return (which is the only year the site currently supports).
- The user experience is not comparable to what you’ll find on commercial sites.
Keeping Your Data Safe
The IRS will protect your personal tax information from unauthorized access if you choose the Fillable Forms option. If you’re using a commercial product, know that these companies employ at least bank-grade security measures to keep your data safe. And they can’t disclose or use your personal information for purposes other than tax return preparation unless you provide informed consent. This all excellent, and it ought to to reassure anyone who’s worried about tax scams. That’s good, because most Americans are concerned about their data being compromised if they file online.
A Good Option for Some
We have not tested all of the Free File sites, so we can’t comment on participants like ezTaxReturn.com or 1040NOW. However, if you just can’t swing the cost of a commercial product and you need support for complex tax issues like self-employment, you should definitely check the requirements for Free File sites, like TurboTax. One of these solutions may be all you need.
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