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Free Tax Software
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Tax Preparation Software Buying Guide
Instead of paying a tax professional hundreds of dollars to prepare your income tax return, you can do it yourself with free tax software available online. The Internal Revenue Service has partnered with 15 companies, dubbed the Free File Alliance, to provide free federal tax preparation and electronic filing for taxpayers with adjusted gross income of $57,000 or less, although you may have to pay a fee for state tax returns.
About 70 percent of taxpayers qualify for the federal program, according to the IRS. You can skirt the restrictions by accessing similar free tax software directly through the websites of big companies including TurboTax, H&R Block, and TaxAct. There you'll be subject to continual upselling; however, an upgrade may prove necessary depending on your circumstances. The free editions accommodate only the simplest and most basic federal tax returns. Anything more than that requires a more expensive software package, and adding a state return to the mix adds another charge. That's one potential advantage of using the Free File software available through the IRS: Some companies offer free filing for participating states or charge lower fees for state returns.
Among all the free tax software out there, we zeroed in on several recommended providers that can help you prepare and e-file relatively straightforward federal returns for free and state returns for less than $20. High on our list is TaxAct, which offers both a free version and a Free File edition available to taxpayers 18 to 57 with adjusted gross Income up to $51,000. Either way, a state return costs $14.95. Along with TaxAct, two other providers we picked, eSmart Tax and FreeTaxUSA, earn positive reviews online and include broad functionality even in their free versions. Users of eSmart Tax who are 52 or younger and earn $57,000 or less can save on state returns by accessing the software through the IRS. Preparing and e-filing state tax returns with the Free File edition costs nothing in a handful of states and $12.95 in others, compared with $19.95 with the free Basic edition on the company's website. FreeTaxUSA charges only $9.95 for state returns, regardless whether taxpayers use the Free File program or the commercial version, which hawks additional services. Free tax software from TaxSlayer, on the other hand, carries a higher fee than the others for state returns ($17.90) and has more limited capabilities. For example, it supports only 1040EZ forms for federal returns. The Free File edition is available only to users with adjusted gross income of $30,000 or less.
Market leaders H&R Block and TurboTax exceed our price range with high state fees for users of their federal free editions (starting at $27.95 and $27.99 respectively). However, both are members of the Free File Alliance and offer discounted or even free filing for states that participate in the State Free File program. That means qualifying consumers in many states can use one of the big players' products completely free. H&R Block Free File ($14.95 for states without Free File) is available to taxpayers 52 or younger with adjusted gross income of $57,000 or less. The TurboTax Freedom Edition ($14.99 for states that don't qualify) is available only to taxpayers with adjusted gross Income of $31,000 or less, active military earning $57,000 or less, and anyone eligible for the Earned Income Tax Credit.
Before deciding, consider the complexity of your tax situation and your comfort with the entire process. While free tax software meets the needs of many filers, companies make the bulk of their profits on upgrades (and you'll get lots of prompts to make that choice, especially if you don't use a Free File edition). Depending on the provider, if you are self-employed or own a small business, earn rental income, got married or had a child, gained or lost money trading stocks, bought or sold a home, or dealt with any number of other complicating factors last year, you may have no choice but to upgrade to more expensive tax preparation software (or turn to a tax professional). The upside is access to more features and guidance. Many companies simply deduct the cost of the software from your refund.
Most companies don't require any upfront payment for online tax preparation software, so you can try out a product or two before making any financial commitments. This will give you an idea what forms and schedules your tax situation demands and which version suits your needs. The flip side is that some frustrated taxpayers fill in all their information only to wind up with an unexpectedly high bill at the end and opt to redo all the work with cheaper tax preparation software.
Of course, the entire process will proceed more quickly if you've already assembled all the relevant information, including your W-2, any 1099s you may have received, and a copy of last year's tax return. By filing electronically, you should be able to save money, minimize errors, and receive your refund in a matter of days. If you insist on filing a hard copy of your return, the free tax software providers mentioned here let you print and mail at no charge, which can save you the cost of state e-filing. One repeat customer of FreeTaxUSA relies on the free printing option as a precaution against identity theft. Just make sure you read the website carefully, because not all companies provide this option.
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Best Free Tax Preparation Software
TaxAct
TaxAct offers a user-friendly interface with instructional videos at the start of each section and help navigating the tax impact of major life events. The wealth of features available with the free software, combined with low prices for e-filing and upgrades, make this company a category leader. You can also buy a CD-ROM version or download the software and file up to five federal returns, although that's more expensive than using an online edition.
Read more »Where to buy
| Purchase Online from TaxAct |
H&R Block Free File
Experts rate this company highly for its interview-style process, information sections, and error-checking feature. While each state return costs $27.95 with the regular free version, users who meet certain age and income requirements can access the Free File version through the IRS website and complete their returns for free in many states and $14.95 in other states.
Read more »Where to buy
| Purchase H&R Block Free File Online |
Good Free Tax Preparation Software
eSmart Tax
This is a solid platform that's easy to use and can handle most straightforward tax situations, as well as import information to speed up data entry. An upgrade to the deluxe version supports investment and retirement income and lets you consult a tax professional by email or phone. The software is online only and backed by the large tax preparation firm Liberty Tax Service.
Read more »Where to buy
| Purchase Online from eSmart Tax |
FreeTaxUSA
Don't expect to find many bells and whistles, but this bare-bones software may be all you need to file your taxes quickly and easily. It's one of the cheapest options yet one of the few that offers free federal filing for those with small-business income, investments, and/or dependents.
Read more »Where to buy
| Purchase Online from FreeTaxUSA |
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Don't Bother Tax Preparation Software
TaxSlayer
This company boasts low prices and helpful tools to guide you through the process, including a feature that helps you figure out the tax implications of recent major life changes such as getting married, having a child, or selling your house. While these helped make TaxSlayer a good choice in the past, recent reviews suggest it hasn't kept up with competitors. The regular free edition supports only Form 1040EZ and the IRS Free File version, which supports all major forms, is limited to taxpayers with adjusted gross income of no more than $30,000.
Read more »Products Mentioned in This Review
TurboTax ReviewTaxSlayer Review
eSmart Tax Review
FreeTaxUSA Review
TaxAct Review
H&R Block Free File Review
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