The days of mailing in paper tax returns are long over. This year, the Internal Revenue Service (IRS) expects Americans will electronically file at least 90 percent of the more than 155 million returns expected by the April 17 tax deadline. That’s not so surprising, given the steady increase in the popularity of e-filing among tax professionals as well as self-preparers. What is surprising, however, is that only a fraction of the estimated 100 million Americans eligible to prepare and e-file their federal tax returns for free will cash in on that opportunity.
“Just under 3 million people used Free File last year,” said Tim Hugo, executive director of the Free File Alliance, a nonprofit coalition of industry-leading tax software companies partnered with the IRS to provide free electronic tax services. RewardExpert spoke with Hugo to learn more about the Free File program and its eligibility requirements.
More than 51 Million Free Federal Returns Filed Since 2003
The Free File Alliance was formed in 2003 as one of 24 government initiatives established by the Office of Management and Budget’s (OMB) Quicksilver Task Force. Designed to provide free federal tax returns to low- and moderate-income Americans, it was also intended to reduce processing costs at the IRS.
“If you look at some of the numbers, depending on the complexity of the return, it can cost the IRS up to $12 to process a paper return versus $1 for an electronic return,” Hugo said. “I think the program has been a big success. Since it was founded, we have provided over 51 million free federal returns. If you estimate an average of $30 a return, you can say we’ve provided the American public with about $1.5 billion in free tax software over the last 15 years.”
If Your AGI Is $66,000 or Less, You’re Eligible for Free File
Determining eligibility for the Free File program is simple. If your Adjusted Gross Income (AGI) is $66,000 or less for 2017, you can use Free File to prepare and e-file your federal tax return. Free File Alliance estimates 70 percent of Americans—or about 100 million—should qualify.
While Hugo said that a lot of the consumers using Free File have been young and single, any American who meets the income guidelines should be able to prepare and e-file their federal tax returns whether they have dependents, investment income, or are self-employed.
“Every tax software company that is part of Free File offers a core suite of the most commonly used tax preparation forms and schedules,” Hugo said. “Some of the companies offer well over 100 forms, so Free File isn’t just for filing 1040EZ. It’s also for 1040 and 1040A. Anyone can really use it.”
While all of the Free File tax software companies offer free federal tax form preparation and e-filing, some include free state tax form preparation and e-filing as well. Free File offers a software lookup tool to make choosing the right tax software company simple.
Hugo emphasized that the only way to ensure you’re preparing and filing your taxes through Free File is to navigate to the tax software company website through IRS.gov.
“You may be able to prepare a return for free directly through some of these companies, but it’s not Free File unless you get there through IRS.gov,” he said. “Look for the link on the home page that says Free File. Then go to the tax software company that way to ensure you’re not charged for your federal return.”
For those who want to prepare and e-file their taxes on their smartphone or tablet, Free File is also available on the IRS mobile app for Android or iOS.
“If you have to file a federal tax return, Free File is free, easy, and safe” Hugo concluded. “You can do it in the comfort of your home. You don’t have to go out to a storefront or buy software. Security experts have checked all of the websites, and over 96 percent of people who have used Free File found the program easy to use and would recommend it to a friend.”