Free File

From Wikipedia, the free encyclopedia

Free File is a service which allows U.S. taxpayers to prepare and e-file their federal income tax returns for free. Through the program, the IRS itself offers fillable forms to all taxpayers, while commercial software companies that are part of the Free File Alliance offer free tax preparation software to tax filers with annual adjusted gross income (AGI) below $72,000.[1][2] The service is available through the IRS's website at www.irs.gov/freefile.

Through the program, 70% of U.S. taxpayers are eligible to use commercial software for free to file their tax returns, though less than 5% of eligible individuals do so. In 2019, investigations by ProPublica concluded that companies such as Intuit and H&R Block had deliberately misled taxpayers into paying for tax preparation services despite qualifying under the Free File program.[3][4] Subsequent investigations by the Senate Committee on Homeland Security and Governmental Affairs and the New York State Department of Financial Services confirmed these findings.[5][6][7][8]

History[]

In November 2001, the U.S. Office of Management and Budget's (OMB) Quicksilver Task Force established 24 e-government initiatives that were a part of the President's Management Agenda. These initiatives were designed to improve Government to Government, Government to Business, and Government to Citizen electronic capabilities.[9]

One initiative, IRS Free File, instructed the IRS to provide free and secure online tax return preparation and filing services to taxpayers. In accordance with this OMB directive, the IRS began working in partnership with the tax software industry to develop a solution. The result was the formation of the Free File Alliance, LLC, a group of tax software companies who provide free commercial online tax preparation and electronic filing services.[9]

According to investigations by ProPublica,[10] TurboTax maker Intuit has engaged in practices that hide the Free File program from eligible taxpayers, and attempt to trick eligible taxpayers into paying for services they could get for free. In response, in 2019 the IRS prohibited participating companies from hiding Free File pages from search engines, and removed the rules that prevent the IRS from offering a competing web site for no-charge filing.

Free File Alliance[]

Main article: Free File Alliance

The Free File Alliance is a consortium of commercial tax preparation software providers who offer their brand-name tax software products for free to lower and middle-income tax filers. Each member is allowed to set eligibility requirements for their software products. However, the cumulative offers must allow 70 percent of U.S. taxpayers - approximately 100 million people - to be eligible for at least one product.[11] Each year, the income limit for eligibility is adjusted to reach 70 percent of the taxpayers. The income limit for 2021 (tax year 2020) is set at $72,000, though some freefile software providers choose to set the income threshold lower. For example, TurboTax's freefile software option is only available to tax filers with an AGI under 39,000 for 2021 filing of 2020 returns. Agreements between the IRS and the Free File Alliance are publicly available.[9] The latest Memorandum of Understanding was signed in 2015 and runs through 2020.[12]

Free File Software[]

One component of Free File is the Free File Software program, which allows lower-income tax payers to use name-brand tax preparation software to prepare and file tax forms for free.

For 2021, anyone whose adjusted gross income is $72,000 or less will be eligible for at least one software product. There are 12 products from which to choose. Each software provider sets its own eligibility requirements, generally related to income, state residency, age, military service or eligibility for the earned income tax credit. Free File is free for federal tax returns only. However, some Free File Alliance members offer state return software for a fee or for free. Most of the software products, but not all, use an interview format in which you are asked questions and your answers are used to populate the electronic form. This format helps taxpayers get the tax credits and deductions they are due. It also means taxpayers do not have to be experts in income tax law. Alliance members cannot sell any refund anticipation loan products through the Free File service. Alliance members are limited in the number of times they can offer to sell other products.

To use IRS Free File, taxpayers generally go through the IRS website at www.irs.gov/freefile. There, taxpayers can find a tax software product one of two ways. They can review a list of companies and their offers. Or, they can use a simple web tool that asks a few questions - such as income, state residency and age - and the tool will locate those software products for which taxpayers are eligible. Once a taxpayer chooses a product, they will be directed off the IRS.gov site and onto the Alliance member's website to complete their federal tax return.[13]

Taxpayers can also access the free file option of the participating software companies by accessing the direct links below. For tax year 2020, there are 9 participating Free File Alliance members with the following requirements to qualify to use their software for free under the Free File program:[14]

  • TurboTax.com, AGI of $39,000 or less. Free state return included.
  • TaxAct.com, AGI of $63,000 or less, and age 56 or younger. Free state return included.
  • TaxSlayer.com, AGI of $72,000 or less, and age 51 or younger. Free state return in certain states.
  • OnLineTaxes.com, AGI between $16,000 and $72,000. Free state return included.
  • FileYourTaxes.com, AGI between $9,500 and $72,000, and age 65 or younger. Free state return in certain states.
  • Free1040TaxReturn.com, AGI of $72,000 or less. No free state returns.
  • ezTaxReturn.com, AGI of $72,000 or less. No free state returns.
  • 1040NOW.com, AGI of $71,000 or less. No free state returns.
  • FreeTaxUSA.com, AGI of $39,000 or less. No free state returns.

In addition to the Free File Alliance members listed above, CreditKarma.com also offers free state and federal tax filing.

Free File Fillable Forms[]

Another component of Free File is Free File Fillable Forms, which is available to all taxpayers, including taxpayers whose incomes are greater than $72,000. It is an alternative to Free File Software, although both are free. Free File Fillable Forms is operated by a private organization, the Free File Alliance and not the IRS. Though IRS links to it, they do not endorse it or any product.[15][16][17][18][19]

Free File Fillable Forms is an electronic version of IRS paper forms. Free File Fillable Forms does not include any elaborate cross-checking or question-and-answer formats (such as is found in many of the Free File Software packages), instead it is a simple fill-in-the blank format (however, it does perform math calculations). Free File Fillable Forms is best for taxpayers who are comfortable preparing their own tax returns or who have been long-time paper filers. There are no income restrictions for using Free File Fillable Forms. It does not support any state tax returns.[20][21][22][23][24]

References[]

  1. ^ IRS.gov, www.irs.gov/freefile
  2. ^ "About the Free File Program". irs.gov. Internal Revenue Service. Retrieved 2016-09-04.
  3. ^ Justin Elliott, Lucas Waldron (2019-04-26). "TurboTax Deliberately Hid Its Free File Page From Search Engines". ProPublica. Retrieved 2021-02-25.
  4. ^ Justin Elliott, Kengo Tsutsumi (2019-05-23). "TurboTax Uses A "Military Discount" to Trick Troops Into Paying to File Their Taxes". ProPublica. Retrieved 2019-05-23.
  5. ^ (2020). IRS Oversight of the Free File Program (Report).
  6. ^ Elliott, Justin (2020-06-09). "Senate Investigation Criticizes the IRS for Failing to Oversee Free Filing Program". ProPublica. Retrieved 2021-02-25.
  7. ^ Elliott, Justin (2019-12-19). "TurboTax Tricked Customers Into Paying to File Taxes. Now Several States Are Investigating It". ProPublica. Retrieved 2019-12-30.
  8. ^ Elliott, Justin (2020-09-08). "TurboTax Tricked Customers Into Paying to File Taxes. Now Several States Are Investigating It". ProPublica. Retrieved 2021-02-25.
  9. ^ a b c "About the Free File Alliance". IRS. Archived from the original on 2011-06-29.
  10. ^ The TurboTax Trap: How the Tax Prep Industry Makes You Pay
  11. ^ "Do Your Federal Taxes For Free" (PDF). irs.gov. Internal Revenue Service. Retrieved 2016-09-04.
  12. ^ "Free File Alliance & IRS Sign Five-Year Agreement to Continue Free File Program". freefilealliance.org. March 18, 2015. Retrieved 2016-09-04.
  13. ^ "Free File: I Will Choose A Free File Software". irs.gov. Internal Revenue Service. Retrieved 2016-09-04.
  14. ^ "IRS Free File | Internal Revenue Service".
  15. ^ https://www.freefilefillableforms.com
  16. ^ Before Starting Free File Fillable Forms https://www.irs.gov/e-file-providers/before-starting-free-file-fillable-forms
  17. ^ Free File: Do Your Federal Taxes for Free https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free
  18. ^ Free File Fillable Forms General FAQs https://www.irs.gov/pub/irs-utl/2012_4f_faqs.pdf
  19. ^ "IRS, Free File Alliance announce changes to improve program" https://www.irs.gov/newsroom/irs-free-file-alliance-announce-changes-to-improve-program-improved-taxpayer-options-available-for-2019-free-file-program
  20. ^ https://www.freefilefillableforms.com
  21. ^ Before Starting Free File Fillable Forms https://www.irs.gov/e-file-providers/before-starting-free-file-fillable-forms
  22. ^ Free File: Do Your Federal Taxes for Free https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free
  23. ^ Free File Fillable Forms General FAQs https://www.irs.gov/pub/irs-utl/2012_4f_faqs.pdf
  24. ^ "IRS, Free File Alliance announce changes to improve program" https://www.irs.gov/newsroom/irs-free-file-alliance-announce-changes-to-improve-program-improved-taxpayer-options-available-for-2019-free-file-program

External links[]

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