With the calendar turning to spring, many Americans are looking to file their annual tax return with the Internal Revenue Service.
Due to pandemic-related strain and a new stimulus bill that authorized changes to the tax code, the IRS has pushed back the federal tax deadline by a month. Individual income tax returns and payments are now due on May 17.
If you’re savvy with your finances, you may choose to file your tax return yourself instead of hiring a professional. The process can be fairly simple with online tax software. Depending on your situation, it could be free.
Free tax filing is a misnomer. The IRS doesn’t charge taxpayers to file a federal return — it’s the preparation services that typically cost money. In fact, the IRS has Free File Fillable Forms, a bare-bones, online tax preparation option for people who are well-versed in taxes. These forms don’t offer much guidance or include state forms, but anyone can use them to prepare and electronically file their taxes for free.
The IRS Free File Program was introduced in 2003 as a way for lower-income taxpayers to prepare their federal, and sometimes state, tax returns with virtual guidance at no charge. The income limit changes each year but is targeted so that 70% of Americans are eligible.
For the 2020 tax year, you are eligible for the IRS Free File program if your adjusted gross income (AGI) was $72,000 or less.
If you meet the income requirements of the IRS Free File program, your best bet is to use the program’s offer browser to find a provider. There, you can input your income, age, state of residence, military status, and whether you are eligible for the earned income tax credit (EITC). Then you will be able to see which offers may be available for you.
It’s important to note that although you access the Free File program through the IRS’s website, it’s not actually run by the IRS. The IRS Free File program is managed by a private-public consortium called the Free File Alliance. There are currently 12 tax preparation companies that are part of the Free File Alliance. Each member of the Free File Alliance is able to set their own criteria for participation, so it’s important to view the different offers to see which one fits you best.
Filing state and local income taxes
Many preparers who participate in the IRS Free File program only offer free federal tax return filing.
Unless you live in a state with no income tax, you’re also going to need to file a state tax return. This is an area where many tax preparers can hit you with unexpected fees. On the IRS Free File website, you can enter in your income, state of residence and other details and see which offers are available for you. Depending on the state where you live, you may be able to find a Free File offer that includes your state return.
TaxAct is one company that offers a free federal return and a free state return in every state for people who are under age 56 with an AGI of $63,000 or less who are eligible for the EITC, or those who are active military.
While tax preparation companies typically do not deal with local or city tax returns, there are other options. If your local municipality or school district assesses income taxes, check with your local tax office. Many municipal tax offices will prepare your tax forms at no additional charge. If that’s not an option, take a look at the forms yourself — city tax forms are fairly simple and use the information from your federal return.
Additional reporting by Tanza Loudenback.