Filing taxes has become more expensive in recent years, with tax preparation and accounting fees seeing an 8.3% increase in November 2023 compared to the previous year, according to the U.S. Bureau of Labor Statistics. This rise in costs can be attributed to a growing accountant shortage in the industry. As a result, taxpayers are now spending an average of $140 to file taxes every year, according to estimates from the IRS.

Exploring Free Filing Options

Fortunately, if your tax return is relatively simple, there are several free filing options available to consider this season. One such option is the IRS Free File program, which is a public-private partnership between the IRS and the Free File Alliance, a nonprofit comprised of tax software companies. This program offers free guided tax preparation software for eligible filers.

The “Biggest Change” This Season: Higher Adjusted Gross Income Limit

One significant change in the IRS Free File program this season is the higher adjusted gross income limit. For 2023 filings, the limit has increased to $79,000, up from $73,000 the previous year. Adjusted gross income is calculated by subtracting “adjustments,” such as pretax individual retirement account contributions and student loan interest, from your total income. This change allows more individuals to qualify for the free filing option.

Not Just for Simple Returns

Contrary to popular belief, the IRS Free File program is not limited to simple tax returns. According to Tim Hugo, executive director of the Free File Alliance, the program supports various required forms and schedules, including Schedule B for interest and dividends and Schedule C for self-employment, contract, or gig economy work. Roughly 70% of taxpayers qualify for Free File, yet only 2% used it during the 2022 filing season, as reported by the National Taxpayer Advocate.

Alternative Free Filing Options

If your adjusted gross income exceeds $79,000, you can still benefit from the IRS Free File program. Free Fillable Forms are available for any income level, serving as an electronic version of a paper return. The use of these forms does not require step-by-step guidance, making them suitable for individuals who are comfortable completing the necessary forms and schedules independently. However, Fillable Forms have limitations, including no support for state filings and access to prior filings expiring after a certain period.

Free Tax Prep Programs from IRS and Non-Profit Organizations

In addition to the IRS Free File program, individuals seeking more guidance can explore free tax prep programs offered by the IRS and non-profit organizations. The Volunteer Income Tax Assistance (VITA) program provides free tax preparation services for taxpayers making up to $64,000, as well as those with disabilities and limited English proficiency. The Tax Counseling for the Elderly (TCE) program focuses on pension and retirement-related questions for filers aged 60 or older. The AARP Foundation Tax-Aide offers free tax prep for low- to moderate-income older adults.

Certain taxpayers may also qualify for the limited Direct File pilot program offered by the IRS this season. While initially invitation-only, the program is expected to expand to certain taxpayers in 12 states by mid-March. Eligible states include Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming. Direct File is designed for individuals with simple tax affairs and accepts a limited range of income sources, deductions, and credits.

Private companies may also offer free filing options, but it is important to be cautious of add-on fees for additional services. Consumer advocates warn that tax prep companies often employ this business model, upselling customers on premium products or services beyond the initial free offering. The Federal Trade Commission has even ruled against Intuit, the maker of TurboTax software, for misleading marketing practices in offering free software to ineligible filers.

Filing taxes has become more expensive due to a growing accountant shortage, leading to increased tax preparation and accounting fees. However, there are several free filing options available for individuals with relatively simple tax returns. The IRS Free File program, Free Fillable Forms, and various free tax prep programs offered by the IRS and non-profit organizations can help eligible taxpayers navigate the tax filing process without incurring significant costs. It is important to explore these options and be cautious of potentially misleading practices by private tax prep companies.

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