The Free File Alliance, a group of eight tax preparation software companies, has partnered with the IRS since 2003 to make federal income tax filing services free to most taxpayers — but few who are eligible actually take advantage of it.
Free File tax prep and e-filing software is now available for this tax reporting season at IRS.gov/FreeFile.
“When you have a product that is free and a product that 98% of the people like when they use it, we just need more people to know about it,” said Tim Hugo, executive director of the Free File Alliance, which receives no funding from the federal government.
“Seventy percent of Americans are eligible to use Free File,” Hugo said. “That’s about 100 million taxpayers. We have about 3 million who use it.”
Free File is limited to taxpayers with an individual income of $79,000 or less, but that is adjusted gross income, meaning after adjustments — such as certain retirement contributions like IRAs, student loan interest, health savings account contributions and certain self-employment expenses — that determine above-the-line income. In addition, wages reported on W-2 forms reflect gross income minus contributions to tax-deferred retirement plans, such as 401(k)s, 403(b)s and the federal government’s Thrift Savings Plan.
Combined, it means taxpayers whose real gross income is well over $79,000 qualify for Free File.
Another misconception is that it is just for simple tax returns, not more complex ones with deductions or special situations.
“You can be part of the gig economy. You can be an Uber driver. You can have rental income,” said Hugo. “Anybody with a 1040 can use Free File. It is not just for simple returns.”
Free File now also includes free state tax returns for 24 states, including Virginia. Virginia’s free filing includes taxpayers with a gross adjusted income of $79,000 or less. Maryland and D.C. taxpayers qualify for free state return filing if their adjusted gross income is below $45,000.
Free File can be used on PCs, laptops, smartphones and tablets. Like those tax prep services that charge for software or downloads, Free File also includes step-by-step help for accurate and secure returns. All companies in the Alliance submit to annual security testing and meet requirements on privacy.
There is no product selling, marketing or linking to participating tax prep companies’ websites or other external links.
There is another free option for earners with an adjusted gross income of over $79,000, called Free File Fillable Forms, though it requires knowledge of tax forms and eligible deductions, without many of the helpful fact-checking prompts.
While an average of just 3% of eligible taxpayers have used Free File in the past, the program has still provided more than 71 million returns since its inception.
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