Daily Money - Issue #230: File your taxes for f-r-e-e

Hi y’all —

By the time you read this, I’ll be in France! My mom and I are on vacation in Paris this week, so I’m trading USD for Euros, New York bagels for croissants, and long hours spent in front of my laptop for long hours spent in art museums.

But listen: You’re not allowed to slack off while I’m OOO. Tax Day is officially less than a month away, so if you’re among the *checks notes* 66 million taxpayers who haven’t filed yet, you should get on it. I’ll even make it easier on you by sharing a piece I wrote on four ways you can file your taxes for free this year.

Allons-y!

1) IRS Free File

IRS Free File is a partnership the government launched with several online tax prep services in 2003. This year, eight name-brand companies are participating. (Spoiler alert: You won't find TurboTax or H&R Block among them, as both have dropped out of the program. More on that later.)

If your adjusted gross income for 2023 was $79,000 or less, you qualify for free guided tax prep through IRS Free File. If your adjusted gross income is over $79,000, you’re only eligible to use Free File Fillable Forms, in which you complete electronic forms yourself without guidance.

IRS Free File is focused on federal tax returns, so you'll need to pay extra attention if you live in a state with income taxes. A few of the IRS Free File offers, like OLT.com and FreeTaxUSA, give a free state filing to anyone who qualifies for a free federal return, but others only offer it to residents of certain states, and some don’t provide free state returns at all.

FYI: The IRS is pretty strict about what its tax software partners can and can't charge for. Free File participants are prohibited from making you pay "anything to file your federal tax return" and asking you to buy "any products or services (for example, promotional rebates) in exchange for having your federal tax return prepared," according to the IRS website. They also can't offer you bank products that come with fees.

2) IRS Direct File

Not to sound like a nerd (I am), but it’s an exciting year at the IRS! The agency is testing a pilot program called IRS Direct File, through which certain Americans can file their federal taxes for free directly with the government.

To be eligible, you must have lived in one of the 12 participating states in 2023. They include Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming. (Note that Direct File is intended for federal returns, not state ones.)

For Direct File, you’ll also need to have a simple tax return. If you’re claiming much beyond W-2 wages, Social Security, unemployment income or $1,500 in interest, you’ll need to pursue a different option. Direct File can only handle things like the standard deduction, earned income tax credit, child tax credit, student loan interest deduction, educator expenses and credits for dependents.

Direct File is currently in a test phase. You can check your eligibility and start your return on the IRS's Direct File webpage.

3) free third-party services

Despite no longer being affiliated with IRS Free File, both TurboTax and H&R Block still have free offers.

There are currently two ways to do your taxes for free through TurboTax: Free Edition and Live Assisted Basic. The former is a DIY option that's available the whole year, and the latter is only free through March 31. For either, you’ll need to have a simple return.

H&R Block's Free Online service starts at $0 for federal and state tax prep. It includes coverage for the earned income tax credit, the child tax credit, education expenses and retirement income. Beyond that, you'll have to pay.

Other free tax software options include FreeTaxUSA, which boasts a “free federal return for everyone” on its website, and Cash App Taxes, which is the rebranded version of Credit Karma Tax. 

Beware: If you're doing your taxes on your own, be diligent. It's easy to get fooled into paying for add-ons like "Pay With My Refund," "Refund Processing Service" or "Refund Transfer." These functions often offer to take money from your refund to cover any prep fees you owe — but usually charge an additional fee in the process. So be careful what you click on, and read the fine print.

4) VITA/TCE/AARP

Whether you're doing taxes yourself or prefer a preparer, the IRS has two initiatives that provide free help for taxpayers who need it: the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. VITA is targeted at people who make $64,000 or less a year, have disabilities or speak limited English. Americans 60 and up who have questions about retirement, pensions and such are eligible to get advice through TCE.

The programs typically operate out of libraries, college buildings and community centers. Use the IRS's free-tax-prep tool to find a provider near you. (You might have to make an appointment.)

Another option for free tax help is AARP Foundation Tax-Aide, which offers both in-person and online tax assistance to "anyone, free of charge, with a focus on taxpayers who are over 50 and have low to moderate income," according to its website. The program runs through April 15.