The Facts About E-Filing Your Taxes for Free

If it’s free, it’s for me!

With few exceptions, no one really enjoys filing their taxes, so why not reduce the sting by doing it for free? Free is everyone’s favorite price for anything.

However, there are restrictions on who, how, and what can be e-filed for free. These filers aren’t invited to the party:

  • Businesses that are required to file as a C corporation using Form 1120 or an S corporation using Form 1120S.
  • Partnerships using Form 1065.
  • Estates and trusts using Form 1041.
  • Nonprofits using Form 990.

The good news is that just about everyone else can e-file for free.

Why E-File?

E-file means electronic filing, and it allows for tax returns that have been completed on a computer to be sent to the IRS.

While any tax return can still be mailed in, e-filed returns have some nifty advantages. The biggest is speed, which is especially important if you are expecting a refund. Most e-filed returns are accepted and processed by the IRS in less than 24 hours, versus up to six weeks or more for paper-filed returns.

The reason for the difference is because most e-filed returns are not looked at by humans. They are processed digitally and, unless there is an error, they are almost immediately approved.

Two Ways to E-File for Free

You can use either commercial software or the IRS’ free fillable forms, available Jan. 20. The difference between commercial tax preparation software and the fillable forms from the IRS is substantial. The commercial tax preparation software guides you through the process of preparing your return by asking questions and using your responses to suggest and complete forms. With the IRS’ fillable forms, you must decide what forms you need to complete.

Many of the commercial tax preparation software companies offer free federal e-file; the best of them can be found here.

The free commercial software comes with restrictions that start with income. To use the free federal version, your income must be less than $60,000 per year. In most cases, you are limited to either the 1040 EZ or the 1040A (the short form). If you itemize or your income is above the limits, they will charge you on a sliding scale depending on the complexity of your return. TurboTax recently announced a limited-time offer allowing simple filers to e-file both their federal and state tax returns for free.

In-Person Tax Preparation Help

The IRS offers two programs that provide hands-on assistance completing federal income tax returns.

VITA (Volunteer Income Tax Assistance) provides free in-person tax help at community and neighborhood centers around the country. Trained IRS volunteers can assist people with disabilities, limited English language skills, and others who earn less than $53,000 per year. VITA volunteers can prepare and e-file basic tax returns.

The IRS has a second volunteer program for senior citizens called Tax Consulting for the Elderly, or TCE. This program is also manned by IRS certified volunteers who are knowledgeable about issues of concern to older taxpayers, such as pensions and retirement-related issues. You can search for either a VITA or TCE center on the IRS website or call toll free 1-800-906-9887.

Even More Help

The IRS recognized that its website and tax documentation can be intimidating and confusing, so it created a sort of help desk that has 25 common questions, such as What is my filing status? Can I deduct my moving expenses? and Who can I claim as a dependent? When you click on a question, rather than having to wade through pages of documentation, you are guided through a series of questions based on your circumstances.

More help is available in calculators and assistants, including an earned income tax assistant. The calculators can help you determine things like whether you are subject to the alternative minimum tax or whether your withholding rate is correct. You can also arrange to pay any tax due using one of the available tools.

If you’re still stumped or just want to get an answer from a real person, you can call the taxpayer customer service line at 1-800-829-1040; just be prepared for what can be lengthy hold times.

E-File State Tax Returns

Of course, filing your taxes may not end with your federal return. You will also have to file a state income tax return unless you live in Alaska, Florida, Nevada, South Dakota, Texas, Washington, or Wyoming. However, even if you live in one of these states, if you have income from something other than wages, you may have to file a state return.

Free e-file commercial software does not usually include state returns for free. Fortunately, many of the other 43 states do have free e-filing available:

States and Cities Offering Free E-File

Arizona Montana Pennsylvania
Arkansas Michigan Rhode Island
California Minnesota South Carolina
Georgia Missouri Tennessee
Idaho Mississippi Vermont
Illinois New York Virginia
Indiana North Carolina Washington, D.C.
Iowa North Dakota West Virginia
Kentucky Oklahoma New York City
Maine Oregon Philadelphia

 

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