In 2003, the IRS launched a program called Free File. Since then, it has served nearly 57 million taxpayers, saving them an estimated $1.7 billion. So why aren’t more people using it? Maybe a little lack of awareness and a little computer coding got in the way. Here’s what you need to know.

Overview of Free File

Free File is a public-private partnership established between the IRS and Free File Inc., a consortium of tax software providers. These providers make their Free File products available to the public through the IRS website. 

The purpose of the program is to allow any taxpayer who has an adjusted gross income of $69,000 or lower to file their taxes at no charge. Since a large percentage of Americans fit into that group, the expectation was most tax filers would use the program.

Unfortunately, early on, there were questions about possible tactics by tax software vendors to sort of, oh, “hide” this option. Most say they didn’t mean to hide it or make things difficult, but complaints were made that caused a couple of changes that go into effect for Tax Year 2019. 

Tax prep software vendors and preparers, such as TurboTax and H&R Block, are now prohibited from hiding free filing services from Google or other search result pages. Also, they must provide their clients with a link to the IRS Free File web page “at the earliest feasible point in the preparation process if they (the clients) do not qualify for [that company’s] Free File offer." 

How Does Free File Work?

IRS Free File provides a process for filing taxes with no charge if you fit the eligibility criteria. The IRS only limits it to people below a certain income point. However, some tax preparation companies place other restrictions on their Free File products. Hence, the requirement for them to tell you if you don't qualify before you get hit with unexpected charges.

The feds really went upscale on this. You can use any digital device from a personal computer to your smartphone to file your taxes at www.IRS.gov/FreeFile. Also, there's an app for that. Go to the IRS2GO app and select Free Tax Help to obtain information about Free File and the provider locator tool.

The Free File webpage provides a "look-up" tool to help you choose the right provider for your needs. You can click through to each provider to see what they offer and, if you don’t like it, you can click back to IRS.gov/FreeFile to look at a different one. You aren't forced into using the first one you select.

If you like the provider you found, you can go ahead and start your tax return. This year, Free File became available on January 11, so you can start now if you want. However, the IRS will not process it until Tax Season opens on January 27, so don’t expect your refund super early. Free File will remain available until October 15, 2020, so if you aren’t ready to file your taxes by April 15, you can still use Free File to file for an extension, no matter your income level.

If you already used Free File before, expect to receive an email from the provider who wants to know if you will use them again. You aren't locked into a provider, so if you were satisfied with the service, you could certainly use that provider again. Or you can change to another, whatever takes your fancy.

Free File is an excellent tool for active-duty military personnel, young tax filers, and first-time filers with modest incomes. Also, it's available for retirees and families looking to save money on tax preparation.

State Taxes

There’s one catch for some providers and tax filers. Tax preparation software providers may file federal taxes for free, but state taxes are another matter. Some providers will file state taxes for free as well, while others may charge based on income, age, and/or state residency.

Many providers offer specialized services for active-duty military personnel earning $69,000 or less for 2019, regardless of any other eligibility requirements.

In either case, the provider is required to have that information available on their website, so you don’t get caught unawares to pay for state tax prep. 

Do-It-Yourself

If you are comfortable doing your own taxes, the IRS provides Free File Fillable Forms, which are the electronic versions of the paper forms you get from the IRS or at your local library. These don’t become available until Tax Season begins, though.

The electronic documents remain available through October, so you can use them to file an extension if needed.

Your Protections Under the IRS Free File Program

• You may file your federal tax return free of charge as long as you qualify for that provider’s offer. If you are eligible, you may not be charged for tax preparation or e-filing your federal tax return.
• You may not be charged unnecessary fees. The provider should not offer any paid services while providing your Free File services. 
• You may not be guided to a different, paid choice once you are on the provider’s website. 
• You can get help from the provider’s free customer service options as long as you are on the Free File company’s website and doing your taxes.
• You can get reminders for Free File from providers you used in the past.
• You are protected from bank fees. As part of the Free File program, you may not be offered any other products such as Refund Anticipation Loans or Return Anticipation Checks. These are typically paid services and do not fit the profile of the Free File program.
• The IRS offers free online assistance for finding a provider through the look-up tool.
• You should receive important information on possible charges for state returns. Read the information on the provider website carefully.

If your adjusted gross income (AGI), found on Form 1040 Line 8b, is $69,000 or less for the 2019 tax year, you are eligible for Free File as far as the IRS is concerned. You can start your tax preparation with a provider now, or do it yourself with the electronic versions of the forms become available January 27, 2020. 

There’s no reason not to take advantage of IRS Free File. Unless your taxes are complicated or you make more than the qualifying limit, Free File fits everyone’s budget.

Happy Tax Season!