No one looks forward to doing their taxes. But if you’re expecting a refund and have all of your paperwork in order, you might want to get a jump on things.
The Internal Revenue Service (IRS) will start processing 2019 returns on January 27, but the IRS Free File program is already open for business.
If you qualify — and most low- and middle-income Americans do — you can prepare your return now and the preparation service will file it as soon as the IRS starts accepting returns — all for free.
The Free File Alliance is a partnership between the Internal Revenue Service and leading commercial tax preparation services. The companies taking part this year are: 1040Now, ezTaxReturn (English and Spanish) FileYourTaxes, Free Tax Returns, H&R Block, Intuit (maker of TurboTax), Online Taxes, TaxAct, TaxHawk and TaxSlayer (English and Spanish). You can see what each member of the Free File Alliance offers. Or use the Free File Lookup Tool: Just answer six questions to find the programs that are available to you.
Anyone with an adjusted gross income of $69,000 or less will qualify for at least one of the Free File software packages. Some of the 10 companies will also prepare and file state tax returns for free.
“If you qualify, then by all means, use Free File and save money,” said Andrea Coombes, tax specialist at NerdWallet. “Each provider has its own eligibility rules based on your personal situation — age, income and where you live — so you may not be able to choose from all of them.”
Note: Some companies have free versions of their software on their websites for people with very simple returns. These are different from the free services offered via the Free File website. For example, the “TurboTax Free Edition” offered on the Intuit website is different from the free version of TurboTax accessible via the IRS Free File website.
“These free products [available on the company’s website] generally require that you have a simple tax situation, one that doesn't need a lot of forms,” Coombes told NBC News BETTER. “The caveat here is that you might get pitched a higher-end software package — and that won't be free.”
NerdWallet’s experts looked at IRS Free File and four other free tax preparation options available this year.
Few people take advantage of the Free File program
The program has saved taxpayers at least $1.7 billion dollars since it began in 2003, according to the IRS. But the savings could be so much greater. While about 70 percent of individual taxpayers qualify for IRS Free File, fewer than 1.6 percent took advantage of the program in 2018, according to the IRS Tax Advocate Service.
An investigation by ProPublica revealed that two of the big tax preparation services — Intuit and H&R Block — took steps to keep the Free File versions of their products from showing up in Google search results. Both companies denied doing anything wrong.
The IRS responded by updating its agreement with the tax-prep companies taking part in this year’s Free File. They have agreed to “increase electronic filing of tax returns” — both online federal tax preparation and electronic filing — “to economically disadvantaged and underserved populations at no cost,” the IRS said.
Under the agreement, they’re also prohibited from “engaging in any practice that would cause the member’s Free Filing landing page to be excluded from an organic Internet search.”
The improved process will make Free File “stronger and give taxpayers another reason to consider this valuable software solution,” IRS Commissioner Chuck Retting said.
Want to talk in person? Free tax help is also available
Preparing a tax return can be confusing. Some people need a little help. Both the IRS and AARP have programs that provide this one-on-one assistance.
“These programs give you the opportunity to speak to someone who has been trained and meets IRS qualifications to provide tax-prep assistance,” said Megan Brinsfield, director of financial planning at Motley Fool Wealth Management. “These IRS-trained volunteers will prepare your taxes on site and electronically file them for free.”
The IRS has two programs that provide free tax preparation help for those who qualify:
- The Volunteer Income Tax (VITA) program is for people with an annual income of $56,000 or less, those with disabilities, and taxpayers with limited English. IRS-certified volunteers provide free basic income tax return preparation and free electronic filing.
- The Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 and older. The IRS-certified volunteers in this program specialize in questions about pensions and retirement-related issues unique to seniors.
To find a VITA or TCE site near you, use the locator tool.
The AARP Foundation’s Tax-Aide program offers free tax preparation for low-to moderate-income taxpayers — especially those 50 and older — at nearly 5,000 locations nationwide. You don’t have to be an AARP member and there’s no age requirement. Check the Tax-Aide Site Locator for locations.
You may still have time to lower your tax bill
There isn’t a lot you can do to reduce your tax burden after December 31 rolls around, but you may have two opportunities left: Contribute to a traditional IRA. If you already have an IRA or qualify to start one, you can make your 2019 contribution of $6,000 ($7,000 if you’re age 50 or older) until April 15 and claim that deduction on this year’s taxes. Contribute to a health savings account (HSA). If you have a high-deductible health plan you can have a health savings account to help pay for your medical expenses. Contributions made by April 15 count as a deduction on your 2019 taxes.
Changes in the law you should know about
For those who itemize, Congress renewed and extended some well-known deductions in December that might help reduce your tax burden. If you qualify for deductions from previous years, you’ll need to weigh the cost vs. advantage of filing an amended return.
- Mortgage insurance deduction: For those who are required to pay personal mortgage insurance (PMI) on their home or vacation homes, those payments are once again deductible through 2020 — and retroactive to 2018.
- Medical deductions: The threshold for claiming medical expenses as a deduction was set to increase to 10 percent of adjusted gross income (AGI) for 2019, but it remains at 7.5 percent through 2020.
- College tuition deduction: Those with qualifying college expenses can deduct up to $4,000 a year (depending on income) whether they itemize or not. This higher education write-off expired at the end of 2017. Congress made the deduction retroactive to 2018 and extended it through 2020.
MORE TAX TIPS
- 11 smart ways to spend your tax refund, according to personal finance experts
- Ask a tax expert: Is it better to file your taxes jointly or separately?
- Freelancing? Here's how to prepare for tax season all year long