Could Filing Your Taxes Finally Be Free and Easy?

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KEY POINTS

  • Right now, some Americans can file their taxes for free, but there are restrictions and the process isn't very straightforward.
  • The federal government is exploring the possibility of creating its own tax-filing platform.


This change would make filing your taxes a little less painful.

No one likes filing taxes. It's boring, it's complicated, and you have to give a bunch of your money to the government. But the kicker is that, if you don't want to use the antiquated paper forms, you nearly always have to pay another company to help you e-file.

Pretty much no one likes this system -- apart from the businesses that profit from it. But fortunately, things could be changing.

Why can't you file your taxes for free?

Many don't realize this, but some people actually can file their taxes for free right now. It's not as straightforward as you might like, though.

The federal government created the Free File Alliance with the online tax service industry back in the early 2000s. Essentially, the government agreed not to create its own free tax-filing platform if the online tax services agreed to offer free filing to those who earn less than $73,000. But the online tax services didn't do what the government had hoped.

Some added minimum income requirements or age limits on free filing. Others capped income eligibility at far lower levels. Many don't advertise their free filing options on their own websites, forcing people to navigate through the IRS's website to get to the place where they can e-file their taxes for free. And online tax services constantly push their paid products. In a few instances, this has led to lawsuits over deceptive advertising practices.

In 2015, H&R Block left the Free File Alliance, followed by Intuit, the makers of TurboTax, in 2016. This has made it even more difficult for Americans to file their taxes for free. But changes could be on the horizon.

What's the government doing about it?

The Inflation Reduction Act, signed into law by President Biden last month, allocates $15 million to study the possibility of creating a free government-backed tax-filing system. Though it's unclear whether this would be open to all tax filers or only those of a certain income, it would provide welcome competition for the online tax services that have dominated the industry for decades.

But it's not going to make its appearance by next tax season or even the one after. The funds allocated for this project are intended to conduct a taxpayer opinion survey about the idea and then to consult with vendors on the building of such a system.

The actual creation of a brand-new e-filing platform would take a lot more money than $15 million and it would likely take quite a bit of time too. So in the meantime, we have to work with what's available.

How do I file taxes for free right now?

You can file your taxes for free by visiting the IRS website's Free File page. Here, you can find fillable forms you can use to file a free paper tax return, regardless of your income level. However, if you go this route, you won't have access to guidance or assistance with the required math.

You can also access free file offers from online tax preparers. Here, you can see all the available offers and any age, income, or location restrictions upfront so you can choose the one that makes the most sense for you. Once you've made your selection, you can visit the online tax service's website and use its tools to file for free.

These services are only designed to help with simple tax returns, though. If you have self-employment income or other complicated tax situations, you may have no choice but to pay for an online tax service, regardless of your income level.

It's not ideal, but hopefully things won't stay this way forever. There may come a day when everyone can file their taxes for free online, but for now, all we can do is wait and watch what the government does next.

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