This Year, ‘Free File’ Really Is Free
BILLSHARK hates to remind you, but tax season is here. The good news is, if you make less than $69,000 a year, the IRS has a program that will let you do your taxes for free.
“But wait,” you’re saying. “Heard that before, even tried it, and got ripped off. No thanks!’
If so, you’re not alone. The tax prep companies pulled some shady shenanigans last year that ended up costing taxpayers way more than “free.” Fortunately, the IRS caught on, and put a stop to them.
Why some tax prep is “free”
First, a little background. When it comes to filing tax returns, much of the rest of the world isn’t like the United States. In at least eight European countries as well as New Zealand, the government figures their citizens’ taxes, fills out the form, sends it to the taxpayer for signature, and it’s done. If the taxpayer disagrees with the contents of the form, or has additional deductions not included there, they are free to make changes before returning it. It takes the average taxpayer five minutes to review the form.
This or similar proposals have been offered over the years for this country, but the tax preparation firms don’t want to lose the enormous profits they make doing our taxes for us. In 2010, a White House panel estimated that American taxpayers spend $140 billion a year to file their tax returns.
In 2013, to help crush any move toward IRS-prepared tax returns, 13 big tax software companies offered the government a deal: They would offer “free” tax returns for low-income taxpayers in exchange for allowing them to do business as usual. Known as The Free File Alliance, the non-profit group reserved the right to set the threshold for free filing, which this year is $69,000. The IRS agreed to this plan.
But the tax-prep companies found ways to trick unaware taxpayers into paying for what was touted as “free.” As reported in The Washington Post, instead of beginning at the irs.gov website, “some folks search online for the Free File program. According to reporting by ProPublica, the companies blocked those pages from being visible by search engines, which may have steered some inquiring customers onto a track to pay a fee to file.”
As a result of numerous complaints, Congress raised concerns that ultimately resulted in changes to the online search process.
“Companies participating in the Free File program are now prohibited from such practices,” the Post explained, “including adding coding that would effectively hide their Free File landing page from an Internet search.”
They also must ensure there is a link on their sites to direct taxpayers back to the IRS Free File landing page if it turns out they aren’t eligible to use that particular firm’s free program. (Each firm sets its own eligibility requirements, apart from the $69,000 cutoff.) This represents a change from last year when some taxpayers were led to believe they weren’t eligible at all for the program, and continued with the fee-paying filing on that company’s site.
What you need to know
The Hill reports that an internal IRS watchdog found, while about 105 million taxpayers—or about 75 percent of us—are eligible to use the free software, only about 2.5 million returns for the tax year 2018 were filed using the program. Part of the problem—aside from the tax firms’ misleading practices—was that most people were unaware of it. Other barriers included confusing language and eligibility limitations by the participating firms, or that taxpayers had tried Free File in the past, found it cost them money, and didn’t use it again.
So here’s what you need to know:
If you made less than $69,000 in income in 2019, you can use the IRS Free-File program. Note: Many of the Free-File participants still charge for preparing state and local tax returns.
The first day you can file your return is January 27, but you can begin preparing your taxes now.
Taxes are due April 15; you can get an extension until October 15, but you still have to pay any taxes owed on April 15th.
Another option for some people is the Volunteer Income Tax Assistance Program (VITA). Run by the United Way, VITA is available to those making less than $69,000 a year, persons with disabilities, the elderly, and those who speak limited English. IRS-certified volunteers provide free filing for local, state, and federal income tax returns to qualified individuals, won’t charge a fee or try to market you based on your tax return information. To schedule an appointment, simply dial 211, or visit their website at 211.org.
And if you need extra money to pay your taxes, why not let BILLSHARK find it for you? We’ll review your bills for free, and charge only if we can save you money.