5 Times ‘Free’ Tax Filing Offers Aren’t Really Free
Written by
Karen Doyle
Edited by
Rebekah Evans
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The Internal Revenue Service (IRS) should want to make it as easy as possible to file your income tax return, right? After all, they want everyone to do it — and do it on time. That was the thinking behind the IRS Free File program — to help taxpayers, especially those with moderate incomes, file their taxes themselves instead of having to pay someone to do it.
There are other options for taxpayers to file for free as well, such as those from tax prep market leaders like TurboTax and H&R Block.
While the Free File program and other free tax prep programs are helpful for many taxpayers, below are some circumstances under which your return is not free after all.
When You Earn Too Much Money
All of the free filing offers have limits on the amount of income you can have and still use them. The income limits can vary, so be sure to check the program you’re considering before you start.
According to the IRS, some programs, including TaxAct and FileYourTaxes.com, are limited to files with adjusted gross income (AGI) of $84,000 or less. You may also need to meet other conditions, such as being in a certain age range or being active military. Other programs, like OnLine Taxes and FreeTax USA, offer free filing for those with AGI of $48,000 or less, with no other conditions.
If You Live in Certain States
Some companies that offer free filing will only let you file your federal income tax return for free and will charge you to file your state return. Others offer free state returns only in certain states. For example, you can use TaxAct to file your federal return for free and if you live in Arkansas, Iowa, Idaho, Mississippi, Montana, North Dakota, Rhode Island, Vermont or West Virginia, your state return will be free as well. In any other state, however, it will cost you to file your state return.
If You Have a Business
If you have a business — even if you’re a sole proprietor or a freelancer — you can’t file your taxes for free. Business taxes are just too complicated for free filing programs. The good news is, you can deduct your tax software or tax preparation fees as a business expense next year.
If You Have a Health Savings Account
If you have contributions to or distributions from a health savings account or HSA, some free filing programs will not work for you. For example, H&R Block’s program, which the company says can be used by about 55% of filers, is not available to those with an HSA.
If You Don’t Have a Simple Return
Free tax filing programs will typically only provide you with a Form 1040 and your state income tax form. If your return requires other forms, such as Schedule A for itemized deductions or Schedule C for business profit or loss, you’ll have to pay to file.
Filing your income tax return is painful enough, without have to pay for the privilege. It’s worth the investment in time to see if you qualify to use a free filing program so you don’t have to pay to file your return.
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