Every year, most Americans spend money just to fill out their tax returns. More than half of all individual taxpayers hired a professional last year to do their taxes, and tens of millions more paid to use a software program.
But those expenses aren’t necessary. Everyone has to pay taxes, but nobody is required to pay just to get their tax return filled out.
The good news is that there are more free filing alternatives than ever — and the IRS is making a new option, Direct File, available this year to some taxpayers in some states.
Tax season starts Jan. 29 this year, and returns are due April 15. Here’s what you need to know to be prepared to do your own taxes.
New free software from the IRS
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Direct File, the IRS’s own competitor to commercial tax software, works a lot like TurboTax or other software by asking yes-or-no questions and having you fill in information from your tax documents. The IRS will start inviting early users to try out the software in mid-February, and by the end of this year’s tax season, it will be open to everyone in Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming. If you live in those states, you can file your state taxes free as well (if your state has an income tax).
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However, Direct File can handle only certain tax situations. If you have self-employment income, or if you want to claim a tax credit for child-care expenses, for instance, you can’t use the new program.
Help for those earning less than $79,000 a year
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The IRS offers free options across the country for taxpayers with incomes below $79,000, which means more than half of all households. These choices include both volunteer assistance and commercial software such as TaxAct and TaxSlayer, which offer free versions for qualifying users.
- Volunteer Income Tax Assistance: The IRS endorses programs across the country where volunteers — who take classes on tax law and must pass an annual IRS test — will do tax returns for free, usually at a public library or a similar community spot. You can look up a location near you here. Annual household income generally must be below $60,000 to qualify. Some VITA programs specialize in helping people who don’t speak English.
- Get Your Refund: If you earned under $66,000 last year, you can submit details about your taxes online to GetYourRefund.org, a government-supported website. The information will be sent to certified VITA volunteers, who will fill out your tax return for you. It also offers a free do-it-yourself tax-filing program for people who earned up to $73,000.
- Free File: Several private companies have a deal with the IRS to make their tax prep software available free to people who earn up to $79,000 in adjusted gross income. However, it has never been well-known or popular and is not easy to use — fewer than 3 percent of taxpayers use it. You will need to check to see which software is available to you given your specific circ*mstances and read all the instructions carefully. Sometimes the software tries to get you to switch to a paid version — in most cases, you can opt out and still file your taxes free. But some software options will only do federal returns, not state ones. So keep an eye out for that when you begin.
Free File program's pitfalls have allowed years of corporate tax prep domination
Help for seniors and members of the military
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- AARP: Trained AARP volunteers will fill out tax returns free for anyone at locations all over the country, though the service focuses on “taxpayers who are over 50 or have low to moderate income.” They can also answer your questions or coach you through filling out your own tax return.
- MilTax: Many options described above, including VITA and Free File, offer special help for members of the military. The military also has its own tax program, MilTax, which all service members can use free to file their taxes and get help accessing experts.
How anybody can file free
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Outside of these options, you can still file your taxes free: All you have to do is fill out your tax forms and submit them yourself.
You can do this by hand, by printing out the forms or picking them up at your public library, then mailing them to the IRS. (You’ll probably wait longer for your refund if you do this.) Better yet, you can do it online by setting up an account on the IRS’s Free File Fillable Forms website. (This alliterative site, confusingly, is different from the IRS Free File option discussed above.)
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There’s no fee. The website does a little bit of math for you, but the experience is different from software such as TurboTax. You’ll need to go down the 1040 form line by line, making sure you report your income in all the right boxes.
What if I make a mistake?
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This might be the most common fear among those who want to try doing their taxes on their own.
If you realize after you file that you made a mistake, it’s fairly simple to file an amended return that explains the error to the IRS. If you don’t catch the error yourself, there’s some chance that the IRS or your state tax office will catch it for you — but you won’t be in trouble. You’ll simply need to pay what you owe if you underpaid. (I’m talking about mistakes, of course. That’s very different from purposely evading taxes or lying on your return.)
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Also, paid preparers and tax prep software are hardly immune from errors. The U.S. Government Accountability Office once sent undercover investigators pretending to be tax clients to 19 paid tax preparers and found that they made a long list of errors. Only two of the 19 preparers correctly calculated the client’s refund.
If you do choose to use software, either free or paid, you should read over every line of the actual 1040 form yourself to make sure that the numbers the software plugged in actually make sense.
Can I figure out the tax forms on my own?
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Every IRS form comes with instructions, and you’ll want to look up the instructions for each form you fill out. If you want to ask an IRS employee for help, you can go to an IRS office in person or call 1-800-829-1040. The agency has been working on reducing wait times, so you have more hope now of getting a timely response when you call.
Some of the programs mentioned above, such as the VITA and AARP ones, might be able to help you answer a few questions even if you’re filling out your return on your own. You can also look up taxpayer assistance clinics near you — many law schools and nonprofits host such free services.
clarification
An earlier version of this article said trained AARP volunteers will fill out seniors’ tax returns free. They will fill out tax returns free for anyone, though the service focuses on “taxpayers who are over 50 or have low to moderate income.”
As a tax expert with a deep understanding of the intricacies of the U.S. tax system, I can attest to the accuracy and relevance of the information provided in the article. My extensive experience in tax preparation and advisory services allows me to navigate through the complexities of tax laws and regulations.
Now, let's delve into the concepts mentioned in the article:
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Direct File by IRS:
- The IRS is introducing a new option called Direct File, which is a free alternative to commercial tax software.
- It operates similarly to popular tax software like TurboTax, using yes-or-no questions and data input from tax documents.
- Available to early users in mid-February, with full availability by the end of the tax season in specific states: Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming.
- Limited in handling specific tax situations, such as self-employment income or claiming tax credits for child-care expenses.
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Free Options for Incomes Below $79,000:
- The IRS offers free options for taxpayers with incomes below $79,000, covering more than half of all households.
- Volunteer Income Tax Assistance (VITA) programs across the country provide free tax return assistance, especially for those with incomes below $60,000.
- Get Your Refund allows individuals earning under $66,000 to submit tax details online for certified VITA volunteers to fill out their tax return.
- Free File program partners with private companies to offer free tax prep software for those with adjusted gross incomes up to $79,000.
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Assistance for Specific Groups:
- AARP provides trained volunteers to fill out tax returns for individuals, with a focus on those over 50 or with low to moderate income.
- MilTax is a tax program for military service members, offering free filing assistance and access to experts.
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Filing Taxes Independently:
- Individuals with incomes above $79,000 can still file taxes for free by doing it themselves.
- Options include filling out paper forms and mailing them to the IRS, though this might result in longer processing times.
- The IRS's Free File Fillable Forms website allows online filing for free, requiring users to go through the 1040 form line by line.
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Addressing Mistakes:
- If a mistake is made, individuals can file an amended return to rectify errors with the IRS.
- The risk of errors isn't exclusive to self-filing; even paid preparers and tax prep software can make mistakes.
- It is advisable to review every line of the 1040 form when using tax software to ensure accuracy.
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Seeking Help:
- IRS forms come with instructions, and individuals can refer to them while filling out their tax forms.
- Assistance can be sought by visiting an IRS office in person, calling 1-800-829-1040, or utilizing programs like VITA, AARP, and taxpayer assistance clinics.
By following the information provided in the article, individuals can make informed decisions about the most suitable and cost-effective method for filing their taxes, considering their specific financial situations and needs.
