How to file your taxes for free this season

Tax returns are more expensive this year as the industry raises fees to deal with a growing shortage of accountants.

According to the U.S. Bureau of Labor Statistics, the cost of tax preparation and accounting fees increased 8.3% year over year in November 2023. The IRS estimates that taxpayers typically spend an average of $140 each year filing their taxes.

But experts say if filing is relatively easy, there are some free filing options to consider this season.

IRS Free File, a public-private partnership between the IRS and Free File Alliance, a nonprofit organization of tax software companies, provides free guided tax preparation software to eligible filers.

Tim Hugo, executive director of the Free File Alliance, said the “biggest change” this season was an increase in adjusted gross income limits, up from last season’s 70,000 yen for 2023 filings. The price was increased from $3,000 to $79,000.

Adjusted gross income is your gross income less “adjustments” such as certain pre-tax individual retirement account contributions or student loan interest. Pre-tax 401(k) contributions also reduce the income reported on your W-2.

If you’re familiar with tax software, Free File has eight partners this season with a variety of income eligibility, and some are offering linked state returns for free. This tool will help you find the best option.

“Free File is not just for simple returns,” Hugo said, adding that the programs require forms and schedules, such as Schedule B for interest and dividends, self-employed, contract or gig economy work. Regarding this, he pointed out Schedule C, etc.

According to the National Taxpayer Advocate, approximately 70% of taxpayers qualify for free filing, but only 2% took advantage of free filing during the 2022 filing season.

“This is a product that we are very proud of,” Hugo said. “I want more people to know about this.”

If your 2023 adjusted gross income was more than $79,000, Free File also offers fillable forms for all income levels. This is an electronic version of the paper tax return. About 460,000 taxpayers used the fillable form through Nov. 3 last season, according to the Free File Alliance.

According to the program, it could be a good option if you’re comfortable filling out the required forms and schedules without step-by-step guidance. However, the fillable form is only available for the current tax year and does not support state filing. After October 20th, our system will automatically delete your account and you will no longer have access to your application.

If you use a fillable form, you should save a copy of your return for your records and for future audits.

If you need more guidance, you can also qualify for free tax preparation from IRS programs by trained volunteers.

The Volunteer Income Tax Assistance (VITA) program provides free tax preparation services to filers with disabilities and limited English proficiency, as well as taxpayers with ordinary incomes up to $64,000.

Tax Counseling for the Elderly (TCE) is for filers age 60 and older and focuses on pension and retirement questions. AARP Foundation Tax-Aide also provides free tax preparation services to low- to moderate-income seniors. Click here to learn more about this program.

Both IRS programs include different formats and schedules, but they have the limitations described here. You can use this tool to find locations near you.

Some taxpayers may also be eligible for a limited Direct File pilot that offers free filing through the IRS this season.

The program will begin by invitation only, but officials plan to roll out the service to select taxpayers in 12 states by mid-March. States affected include Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming.

“It’s basically for people who do very simple tax work,” said Stephen Hamilton, an assistant professor of economics at George Washington University.

This season, Direct File will only accept Form W-2 wages, Social Security retirement income, unemployment income, and interest of $1,500 or less. You must claim the standard deduction, and the system only accepts a small number of credits and other tax breaks.

Some taxpayers may also have free filing options available from private companies. But “if you use a tax preparation company, be aware of surcharges for additional services and expect additional fees,” says Ed Mierswin, a consumer advocate with the US Public Interest Research Group. Mr. Ski said. “That’s the business model.”

In January, the Federal Trade Commission upheld a September ruling: intuition, TurboTax, a maker of tax preparation software, violated federal law by selling free software to ineligible filers and upgrading to deluxe and premium products. Intuit has appealed the “deeply flawed decision,” a spokesperson said.