Nobody but nobody likes giving their hard-earned money to the tax man. Preparing your tax return can be a nightmare, and paying somebody to do it can be expensive.
But fear not, intrepid taxpayer. There's a big trend in the tax preparation industry, and some of the biggest names are on board. The word is out: You can do your tax return online for free! Unfortunately, "free" doesn't always turn out to be free, so it pays to do your research before making a choice. Without further ado, here are several options to file your return without spending a dime.
Your doting uncle wants to help
Your kindly old Uncle Sam provides options for free tax-preparation. The Free File Alliance is a partnership that was formed between the IRS and industry-leading tax-preparation companies in the private sector. It began as an IRS initiative to provide greater access to free e-filing to consumers.
To qualify for Free File, taxpayers must have adjusted gross income of $64,000 or less. A visit to the start page lists a dozen participating companies, including such well-known names as H&R Block, Inc. (NYSE:HRB) and Intuit Inc.'s (NASDAQ:INTU) TurboTax, among others. In addition to the income requirements, each company provides a list of its own restrictions, such as state of residence, age, and income requirements, so it does require a little time to determine which choice is right for your personal situation. In many cases, though your federal return can be filed for free, that same benefit doesn't extend to your state return. Taxpayers should also be aware that any deviation from the requirements will likely lead them to pay fees to the preparer.
The IRS also sponsors two free tax-preparation programs aimed at specific taxpayers. The Volunteer Income Tax Assistance program is designed to help those with disabilities, those who have difficulty with the English language, and taxpayers who make less than $54,000 per year. The somewhat misnamed Tax Counseling for the Elderly program aims to help the elderly, but it will in fact assist all taxpayers with retirement-related matters such as pensions and employer-sponsored retirement plans.
Skip the middle man
Those who are estranged from their kindly old uncle can cut out the middleman and go direct to the source.
H&R Block offers a do-it-yourself option called More Zero, which is available to six in 10 taxpayers. The service allows you to import a previous tax return (even from a competing tax-preparer), upload documents, and prepare and file both state and federal returns. The free filing includes forms 1040EZ, 1040A, and a full 1040 including a Schedule A and the Earned Income Tax Credit form. Taxpayers can also include student loan interest, educator expenses, and the tuition and fees deduction. It also lists Schedule A filers with mortgage payments, child care expenses, and charitable donations. H&R Block claims that as many as 87 million taxpayer are eligible to file for free.
Digital competitor TurboTax offers a competing version dubbed Absolute Zero. It estimates that 60 million taxpayers will qualify for its service. While providing many of the same benefits as Block's offering, it has a short list of requirements:
- Your income must be less than $100,000
- You must not own a home or property
- You must not have sold any investments
- You must not have owned a business during the tax year
- You must not have 1099 forms
- You can't report medical expenses
There's also a newcomer to the field: Independently owned Credit Karma now offers free filing, and it also promises no up-selling. It provides an extensive list of forms that it supports. In a candid explanation of how it can offer this service, it states: "When you visit Credit Karma, we show you offers and recommendations (like credit cards or loans) that could save you money. If you take one of these offers, the bank or lender usually pays us."
Each of these services has similar, slightly different offerings and requirements. Lest there be any doubt, these companies are not doing this out of the goodness of their corporate hearts. There may be fees if you need a form that isn't covered, if you import last year's return, call phone support, or exceed any of the basic requirements. While taxpayers with the simplest returns will likely qualify for the truly free filing, if you plan to use one of these free services, do your own research to determine which option best suits your personal tax situation. These companies hope that when you need to complete a more complicated return, you'll remain with them as a paying customer.