By Louis DeNicola, Cheapism.com
If you're dreading tax time because your papers aren't in order or a huge bill is looming, you're not alone. But if you're worried about shelling out extra money to pay for tax preparation software, there may be a free solution. Taxpayers who earned no more than $58,000 last year can access the Internal Revenue Service's Free File program and prepare and e-file federal tax returns online at no charge.
About 100 million people (70 percent of American taxpayers) meet this requirement, according to the Free File Alliance, which counts 14 participating companies. Among them are well-known brands such as H&R Block and TurboTax. Each provider sets its own rules for who is eligible within the IRS income limit. Some set lower income levels and have age and location requirements. To avoid these restrictions, filers can opt for "value-added" versions of the software that aren't part of the Free File program. These still include free e-filing for federal returns, but they push paid upgrades and features.
Although federal filing is free, there may be a cost for state filing. Some preparers, including TurboTax, charge for separate software to prepare the state return and collect a separate fee to file it. Some frustrated users do all the hard work of preparing their returns before realizing how much they'll have to pay. A State Free File program does exist for residents of many states.
Cheapism.com has identified four providers with commendable Free File service, including state tax preparation at low or no cost. Two of these top picks provide the full package for less than $15. The other two may charge a little more but are associated with bricks-and-mortar firms.
TaxAct offers the Free File option to taxpayers who made $52,000 or less and fall between the ages of 18 and 57. Filers in 19 states and the District of Columbia can also prepare and file state returns for free; otherwise they cost $14.99. The Free Edition (as opposed to Free File) has no restrictions and is also available as a free download for Windows users -- a good choice if you're uneasy transmitting personal information online (you can print for free, as well). Video tutorials lend assistance and users can email tax experts with additional questions.
H&R Block requires taxpayers to be under 52 years old and have an income of $58,000 or less to use the Free File edition of the company's software. Free state filing is included for residents of 21 states and DC; it costs $14.99 otherwise. The H&R Block Free Edition (which isn't part of the Free File program or subject to its age and income limits) charges $27.99 for state filing. For some users, having a well-known brand with retail locations associated with the software provides peace of mind that's worth the extra cost.
FreeTaxUSA extends its Free File offer to taxpayers between 17 and 75 who made less than $58,000 and live in states with income tax. FreeTaxUSA also provides preparation and free federal e-filing without these restrictions. In both cases state tax returns cost $12.95. The service is relatively simple -- there are no video guides, for example -- but it can accommodate people who are self-employed, have dependents, own a home, or have capital gains to report. Other software providers charge a premium to filers who need that support.
ESmart Tax furnishes online tax preparation software associated with Liberty Tax Service. Its Free File version is open to 18- to 54-year-olds with income of $58,000 or less. ESmart Tax also has a free Basic Edition without these restrictions. Both allow only simple returns (no itemized deductions or dependents) and charge $19.95 for state filing. Reviewers have commented on the site's clunky design in past years but admire a recent facelift.
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