During tax season, everyone is looking for ways to save money, but there seems to be a free option that remains largely unnoticed and underutilized by eligible taxpayers. The IRS Free File program, established in 2002, offers a guided tax software for federal returns to taxpayers with a certain income threshold. Despite its potential, only about 3% of filers took advantage of this program last season, leaving millions of Americans unaware of the money-saving benefits it provides.

IRS Free File is a public-private partnership between the IRS and the Free File Alliance, a nonprofit coalition consisting of tax software companies. These eight partners, carefully selected for the 2023 filing season, offer free tax software and, in some cases, state filings for eligible taxpayers. According to Tim Hugo, the executive director of the Free File Alliance, approximately 70% of taxpayers, or roughly 100 million Americans, are eligible for this program.

While the IRS is introducing its Direct File software pilot this season, it emphasizes that Free File remains an excellent option for claiming valuable tax credits, such as the child tax credit and the earned income tax credit. IRS Commissioner Danny Werfel emphasizes the positive impact of Free File, stating, “Through the years, Free File has helped millions of taxpayers, and it remains an important option for people to consider using to quickly and easily file their taxes.”

In 2023, individuals with an adjusted gross income of $79,000 or less can take advantage of Free File, an increase from the $73,000 limit in 2022. Adjusted gross income is calculated by subtracting “adjustments” from total earnings, such as certain pretax individual retirement account contributions and student loan interest. Contributions to pretax 401(k) accounts also reduce total income. Additionally, Free File offers Fillable Forms suitable for all income levels, providing an electronic alternative to paper filing.

While each Free File partner has different eligibility requirements based on age, income, and residency, the software can handle more tax situations than expected. Contrary to popular belief, Free File is not solely for simple returns. It covers a wide range of tax forms and schedules, including Schedule B for interest and dividends and Schedule C for self-employment, contract work, or gig economy income. Although partners are not obligated to cover all federal income tax forms and schedules, they are designed to include the most commonly filed ones, ensuring convenience for users.

For those who need more time, Free File also allows for filing extensions, moving the deadline from April 15 to October 15. However, it is important to note that taxes owed must still be paid by the original deadline. While complicated filings may require professional guidance, Free File can handle various tax situations and offer much-needed assistance to filers who may be unaware of their eligibility or the available benefits.

Despite its significant advantages, IRS Free File remains a largely untapped resource for saving money during tax season. As more individuals become aware of this program and its benefits, it has the potential to revolutionize the way millions of Americans file their taxes. By taking advantage of this free option, eligible taxpayers can experience a smoother tax filing process and potentially claim valuable tax credits, resulting in more money in their pockets.

Wealth

Articles You May Like

Strategic Dividend Investing: Insights into Prominent Dividend Stocks
Market Insights: A Comprehensive Look at Current Trends and Predictions
HSBC’s Strategic Moves: A Strong Q3 Earnings Report and Share Buyback Initiative
Comcast’s Strategic Considerations: Navigating the Shifting Landscape of Cable and Streaming

Leave a Reply

Your email address will not be published. Required fields are marked *