In 2001, the IRS was mandated to offer free tax preparation service alongside filing service to taxpayers that qualify. This led to the creation of the free filing alliance in 2003 by Uncle Sam.
It is a coalition of private tax software providers to offer free service to almost all taxpayers. However, some people might not get the needed assistance if the income is above a given eligibility limit.
Since 2003, more than 60 million tax returns have been filed. Sadly, many eligible taxpayers do not use this service for their tax return preparation and filing.
Qualification for Free File
Your adjusted gross income (AGI) determines your qualification for an IRS-free file. More than 100 million Americans qualify, which is about 70% of the population.
As long as your annual gross income is $72,000 or less, you qualify for a free file, meaning you can prepare your tax return using the Free File software.
For people with AGI above $72,000, while they still get access to some free IRS forms, which they can fill, there will not be personalized and interactive assistance from Free File.
It is important to note that your adjusted gross income of $72,000 is what you have after making some adjustments to your income. It is not necessarily everything you earn in the year. As a result, your salary needs not to be below $72,000 to be eligible.
Free File Alliance
Free file alliance brings together a list of member software providers on the website. Members are well-known names in the tax world like TaxACT, Tax Slayer, Intuit and many others.
Uncle Sam examines all the members to ensure that they meet the privacy and security standard. Also, they all meet the Safeguard Rules alongside the Federal Trade Commission.
There is a free tool online on the Uncle Sam website with which taxpayers can get the Free File option that appeals to them the most.
Restrictions on Age
There are limits and restrictions on the number of taxpayers that can use the Free File software every year. This restriction is based on the Bipartisan Policy Center, which makes some members of the alliance impose their limitations on taxpayers.
Many of the 10 Free file alliance members have no eligibility requirement. The Bipartisan Policy Center reveals that three have no age limit while five only apply to taxpayers below the age of 60.
Overview of Free File
Taxpayers can easily access the alliance providers' software on Uncle Sam's website. One is not obligated to use any particular provider; thus, there is the freedom to select the one that works best for you. All you have to do is click the link, and Uncle Sam will direct you to the provider so you can examine the requirement if it works for you.
On reviewing the application, you create an account, and the software provider will hold your hands through the filing of the tax return. It involves answering a series of questions while the software searches for tax breaks and recommends the best filing route for you, judging by your answers.
The provider will file your return electronically, so you will get an email after Uncle Sam accepts it. The taxpayer receives a free preparation and filing of the federal tax return.
One can also freely make tax payment as well using the IRS Direct pay
Using Free File: Pros and Cons
Pros
Filing is free
About 70% of Americans are eligible
The software asks relevant questions that guide you through the tax filing process.
This removes the hassle of paying for a tax software
Information supplied is protected from breach
Users also get free customer service from the software providers
Cons
The software providers might not be compatible with some operating systems. Network providers, in some cases, also might cause it.
There could be a glitch that could mean losing information if you access the software via your phone.
This software does not come with free preparation for the state tax return, as you might need to pay for those.
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