This year, there are numerous ways to prepare and file income tax returns free of charge — but the variety of features and qualifying criteria is dizzying. So it is important for filers to slow down and make sure the programs they choose are really the ones they want.
The Internal Revenue Service continues to offer the Free File program — online, do-it-yourself tax preparation software from a dozen commercial vendors — to low- and moderate-income filers. (Generally, this refers to people who earn less than $64,000.)
About 100 million people are eligible to use Free File, but only about 3 million do each year, said Tim Hugo, the alliance's executive director. The disparity, he said, may be a result of the IRS' lack of an advertising budget.
Free File also faces competition from tax software companies, many of which offer free tax software products on their websites.
Intuit, for instance, offers TurboTax All Free through the IRS Free File program. Lower-income filers can use All Free even if they have somewhat complex tax returns or are self-employed. Intuit, however, limits the offering to filers making less than $33,000, unless they are members of the military.
Consumers also can visit TurboTax's own website to use free software known as TurboTax Federal Free. This version, however, is only for those filing simple 1040A or 1040EZ forms.
TurboTax's website also promotes a free offer called Absolute Zero, which it says is a promotion based on the Federal Free software, rather than a distinct product. The offer, which typically ends in late March, includes free preparation and filing of a federal return as well as a state return. After the promotion ends, Federal Free is still available, but filers pay extra to prepare state returns, says Intuit.
Also, Absolute Zero is not free for those who want the program to import a tax return from last year automatically, or want "live, one-to-one" help. For that, filers must pay $30 for an extra bundle of features.
Other providers set additional criteria for their free products.
In addition to income limits, for instance, H&R Block's Free File offering is limited to those ages 17 to 50. But Block's More Zero offering, available through its website, has no age restrictions.
Asked whether the plethora of free offerings with varying details is confusing for consumers, Hugo of the Free File Alliance demurred.
"Confusing isn't the word I would use," he said.
Rather, he said, the additional offerings provide more ways for consumers to find tax preparation products that meet their needs.
"It's an opportunity," he said.
A new entrant to the free online tax preparation lineup this year is Credit Karma Tax, which now offers free tax returns and filing to anyone who creates an account on the Credit Karma website, best known for offering free credit scores. Credit Karma Tax, which is not a member of the Free File Alliance, emerged from Credit Karma's purchase last year of AFJC Corp., an online tax preparation company.
Ken Lin, chief executive of Credit Karma, said the company's free software had no income or age restrictions. Users may get promotions for products like credit cards or loans — but only if they give permission, Lin said.
Ann Carrns writes for the New York Times.
