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The IRS Free File Program is a service that allows U.S. taxpayers to prepare and e-file their federal income tax returns for free. Through the program, commercial tax software companies that are part of the Free File Alliance offer free tax preparation software to tax filers with annual adjusted gross income (AGI) below $73,000 for Tax Year 2022. The AGI is adjusted and typically increases slightly for each tax-filing season.[1][2] The service is available through the IRS's website at www.irs.gov/freefile. Free fillable forms also are available to all taxpayers as part of the Free File Program.

More than 65 million American taxpayers have used Free File since its inception in 2003. Using a conservative savings estimate of $30 per return, the IRS Free File Program has saved taxpayers nearly $2 billion that they otherwise would have spent for tax preparation during this period.

Through the program, 70% of U.S. taxpayers are eligible to use commercial software for free to file their tax returns and almost all taxpayers can use free fillable electronic versions of paper forms to electronically file their tax returns,[3] though less than 5% of eligible individuals do so. In 2019, investigations by ProPublica asserted that companies such as Intuit (makers of TurboTax) and H&R Block misled taxpayers into paying for tax preparation services despite qualifying under the Free File Program.[4][5] Subsequent investigations by the Senate Committee on Homeland Security and Governmental Affairs and the New York State Department of Financial Services confirmed these findings.[6][7][8][9]

As of the 2021 tax filing season, the two most used tax-filing software programs (TurboTax and H&R Block) no longer participate in the Free File Program. With the two largest members of the Free File Alliance ending their participation in the Free File Program, there have been renewed calls for the IRS to develop and offer their own free tax-filing software to taxpayers.[10]

History

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In November 2001, the U.S. Office of Management and Budget's (OMB) Quicksilver Task Force established 24 e-government initiatives that were a part of the President's Management Agenda. These initiatives were designed to improve Government to Government, Government to Business, and Government to Citizen electronic capabilities.[11]

One initiative, IRS Free File, instructed the IRS to provide free and secure online tax return preparation and filing services to taxpayers. In accordance with this OMB directive, the IRS began working in partnership with the tax software industry to develop a solution. The result was the formation of the Free File Alliance, LLC, a group of tax software companies who provide free commercial online tax preparation and electronic filing services.[11]

According to investigations by the news organization ProPublica,[12] TurboTax maker Intuit allegedly engaged in practices that hid the Free File Program from eligible taxpayers, and attempted to trick eligible taxpayers into paying for services they might be eligible to receive for free.

In 2020, H&R Block ended its participation in the Free File Program.[13] In July 2021, Intuit announced that its TurboTax product would no longer participate in the Free File Program effective as of the 2021 tax season.[14] For tax-filing season 2023, seven tax software companies are participating in the Free File Program.

For tax-filing season 2024, the IRS announced a pilot of Direct File, where people can calculate and submit their federal taxes and some state taxes in partnership with select state tax agencies for free. This initiative came as a result of the 2022 Inflation Reduction Act, signed into law by President Joe Biden.[15]

Free File Alliance

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Main article: Free File Alliance

The Free File Alliance is a consortium of commercial tax preparation software providers that offer their brand-name tax software products for free to lower and middle-income tax filers. Each member is allowed to set eligibility requirements for their software products. However, the cumulative offers must allow 70 percent of U.S. taxpayers - approximately 100 million people - to be eligible for at least one product.[16] Each year, the income limit for eligibility is adjusted to reach 70 percent of the taxpayers. The income limit for 2022 (tax year 2021) is set at $73,000, though some Free File software providers choose to set the income threshold lower. Agreements between the IRS and the Free File Alliance are publicly available.[11] The latest memorandum of understanding was signed in 2021 and runs through 2023.[17]

Free File Software

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The Free File Program, a public-private partnership between IRS and private-sector tax software companies, allows lower- and middle-income taxpayers to use name-brand tax preparation software to prepare and file tax forms for free.

For 2022, anyone whose adjusted gross income is $73,000 or less will be eligible for at least one software product. There are 7 products from which to choose. Each software provider sets its own eligibility requirements, generally related to income, state residency, age, military service or eligibility for the earned income tax credit. Free File is free for federal tax returns only. However, some Free File Alliance members offer state return software for a fee or for free. Most of the software products, but not all, use an interview format in which you are asked questions and your answers are used to populate the electronic form. This format helps taxpayers get the tax credits and deductions to which they are eligible. It also means taxpayers do not have to be experts in income tax law. Alliance members cannot sell any refund anticipation loan products through the Free File service.

To use IRS Free File, taxpayers generally go through the IRS website. There, taxpayers can find a tax software product one of two ways. They can review a list of companies and their offers. Or, they can use a simple web tool that asks a few questions - such as income, state residency and age - and the tool will locate those software products for which taxpayers are eligible. Once a taxpayer chooses a product, they will be directed off the IRS.gov site and onto the Alliance member's website to complete their federal tax return.[18]

Free File Fillable Forms

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Another component of Free File is Free File Fillable Forms, which is available to all taxpayers, including taxpayers whose adjusted gross incomes (AGI) are greater than $73,000. It is an alternative to Free File Software, although both are free. Free File Fillable Forms is operated by a private organization, the Free File Alliance and not the IRS. Though IRS links to it, they do not endorse it or any product.[19][20][21][22][23]

Free File Fillable Forms is an electronic version of IRS paper forms. Free File Fillable Forms does not include any elaborate cross-checking or question-and-answer formats (such as is found in many of the Free File Software packages), instead it is a simple fill-in-the blank format (however, it does perform math calculations). Free File Fillable Forms is best for taxpayers who are comfortable preparing their own tax returns or who have been long-time paper filers. There are no income restrictions for using Free File Fillable Forms. It does not support any state tax returns.[19][20][24][22][23]

References

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  1. ^ IRS.gov, www.irs.gov/freefile
  2. ^ "About the Free File Program". irs.gov. Internal Revenue Service. Retrieved 2016-09-04.
  3. ^ "Free File: Do your Federal Taxes for Free | Internal Revenue Service". www.irs.gov. Retrieved 2023-05-17.
  4. ^ Justin Elliott, Lucas Waldron (2019-04-26). "TurboTax Deliberately Hid Its Free File Page From Search Engines". ProPublica. Retrieved 2021-02-25.
  5. ^ Justin Elliott, Kengo Tsutsumi (2019-05-23). "TurboTax Uses A "Military Discount" to Trick Troops Into Paying to File Their Taxes". ProPublica. Retrieved 2019-05-23.
  6. ^ United States Senate Homeland Security Permanent Subcommittee on Investigations (2020). IRS Oversight of the Free File Program (Report).
  7. ^ Elliott, Justin (2020-06-09). "Senate Investigation Criticizes the IRS for Failing to Oversee Free Filing Program". ProPublica. Retrieved 2021-02-25.
  8. ^ Elliott, Justin (2019-12-19). "TurboTax Tricked Customers Into Paying to File Taxes. Now Several States Are Investigating It". ProPublica. Retrieved 2019-12-30.
  9. ^ Elliott, Justin (2020-09-08). "TurboTax Tricked Customers Into Paying to File Taxes. Now Several States Are Investigating It". ProPublica. Retrieved 2021-02-25.
  10. ^ "The IRS has a big opportunity to fix the way Americans file taxes". 13 August 2021.
  11. ^ a b c "About the Free File Alliance". IRS. Archived from the original on 2011-06-29.
  12. ^ The TurboTax Trap: How the Tax Prep Industry Makes You Pay
  13. ^ "IRS's Free File Partners Moving Forward Without H&R Block".
  14. ^ "Intuit will no longer be a part of an IRS program that helps millions of Americans file taxes for free". CNBC. 16 July 2021.
  15. ^ Hussein, Fatima. "The IRS is launching a direct file pilot program for the 2024 tax season — here is how it will work". AP News. Retrieved 29 January 2024.
  16. ^ "Do Your Federal Taxes For Free" (PDF). irs.gov. Internal Revenue Service. Retrieved 2016-09-04.
  17. ^ "Free File Alliance & IRS Sign Five-Year Agreement to Continue Free File Program". freefilealliance.org. March 18, 2015. Retrieved 2016-09-04.
  18. ^ "Free File: I Will Choose A Free File Software". irs.gov. Internal Revenue Service. Retrieved 2016-09-04.
  19. ^ a b "Home". freefilefillableforms.com.
  20. ^ a b Before Starting Free File Fillable Forms https://www.irs.gov/e-file-providers/before-starting-free-file-fillable-forms
  21. ^ Free File: Do Your Federal Taxes for Free https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free
  22. ^ a b Free File Fillable Forms General FAQs https://www.irs.gov/pub/irs-utl/2012_4f_faqs.pdf
  23. ^ a b "IRS, Free File Alliance announce changes to improve program" https://www.irs.gov/newsroom/irs-free-file-alliance-announce-changes-to-improve-program-improved-taxpayer-options-available-for-2019-free-file-program
  24. ^ Free File: Do Your Federal Taxes for Free https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free
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