GREENSBORO, N.C. — Americans spent $11 billion on tax-preparation services last year. A stunning amount of money, given there are several ways to avoid the $30 to 200 paid services charge.
Tax services get away with charging people to file their tax forms, but they're also required to provide a free means of filing.
In 2001, with electronics ramping up in everyday life, the United States' government drafted multiple initiatives to improve how the federal government engaged with local governments, businesses and citizens.
One of those initiatives, IRS Free File, mandated the IRS to provide free electronic tax return preparation and filing services to taxpayers.
The initiative threatened the leading tax filing services at the time. Those companies charged money to provide the services the IRS planned to provide for free.
In a skin-saving agreement with the IRS, the leading tax filing companies struck a deal with the IRS to create the filing software for the government in a public-private partnership called the Free File Alliance, LLC.
Many people, however, are unaware of the "Free File" service. Today, most tax filing companies are not keen on flaunting this free service. In fact, in the past, they have done the opposite.
Last year, ProPublica revealed that Intuit, the maker of TurboTax, concealed its free file product from search engines and pushed low-income taxpayers into a paid version. The company now faces a lawsuit. Intuit denies the allegations.
If you earn less than $69,000 a year, you can use the "Free File" software. TurboTax, H&R Block and TaxSlayer are a few of the "Free File" partners. In 2021, there are 10 products to choose from.
To ensure you won't be charged, it's important to access the software through the IRS' website. Using the tools through other means, including searching online or using an account you set up for free in a previous year, could shift you into a paid product.
Using the IRS' free file page also makes it easier to find the specific product you're eligible for. While anyone earning less than $69,000 should be able to use at least one free-filing product, each tool has slightly different requirements. For instance, FreeTaxUSA requires your income to be less than $36,000, while Free 1040 Tax Return isn't available to people living in Florida, Tennessee, Texas or Washington.
It's a good idea to use the IRS' lookup tool, which asks about your income, age and residence in order to tell you what free software you qualify for. According to Nina Olson, the National Taxpayer Advocate from 2001 to 2019, the system was designed so that no single tax software could have a monopoly on free tax prep, but it had the inadvertent effect of making free filing complex and more confusing for taxpayers.
If you make more than $69,000, you can use "Free File Fillable Forms", but it is a less guided, more complex process. You can read more on "Free File Fillable Forms" in the link below:
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