If you’re still doing your taxes on paper IRS forms, then you need to rethink what you’re doing. Filing online and submitting your federal tax forms electronically makes so much sense it’s hard to know where to begin to list all the reasons why you should be filing your taxes this way.
IRS E-File is Free But’s It’s Not Necessarily the IRS
Well, to begin with you can file electronically and it’s free. The IRS website has a page totally dedicated to efiling. It outlines what you need to know to get started doing your income taxes electronically (e-filing). You can either e-file with the IRS for free here or you can use commercial tax prep software. Sometimes the companies providing these different methods are the same companies. For example, Turbo Tax offers an approved freefile version of its tax prep software but also a paid version with all kinds of bells and whisltes.
The IRS version of electronic tax filing software is called freefile. It’s not actually tax preparation software. It’s a gathering of third party providers who offer tax prep software, who have been approved by the IRS. One thing is common to all the free tax filing providers approved by the IRS: you cannot have an annual income of more than $57,000 in order to qualify for FreeFile. You can either browse their list of FreeFile companies like Turbo Tax or H&R Block’s Free File or you can answer a few questions online and they’ll match you up with a FreeFile company.
To become a FreeFile company, tax prep outfits must pass strict requirements and be approved by the IRS. The list of approved FreeFile companies is here.
Free File Fillable Forms- Skip This One
The IRS also has a link to what it called Free File Fillable Forms. You can do your 1040, 1040 EZ or 1040A online and efile for free. It’s kind of like using paper forms but you’re filling them out online.
Why do that when you can use tax prep software that guides you step by step in an interview format, through doing your income taxes. It’s easier and much more pleasant to have the software do the calculations for you.
What We Recommend
We like the free versions of large tax filing companies like TaxAct. They will hit you with a few ads along the way as you are answering their tax-related questions. For example, they will invariably encourage you to get some sort of audit protection for your tax return. For around $50 you can feel confident that they will represent you if you get audited. Read the fine print, however, to make sure you understand what you’re getting and what you’re not getting.
Usually you’ll pay around $15 more for the state tax program that goes along with the free version of your federal tax return software. If you are lucky enough to live in a state without income tax then your tax prep costs are going to be very minimal.