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Tax Tips

How to File Your Taxes for Free — With or Without Help From Elizabeth Warren's Proposal

Some software purveyors are raising prices. One Democrat proposes a solution — but it comes too late for this year.

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If you summon an Uber during rush hour, you’ll probably pay a premium to get to your destination. And with the tax deadline approaching, many taxpayers are discovering that tax software providers have their own versions of surge pricing. Prices on popular tax software programs are up to 30% higher than they were in February, and some free offerings have disappeared.

See Also: Tax Tips for Last-Minute Filers

For example, TurboTax Absolute Zero, which allowed taxpayers who filed a 1040EZ or 1040A tax return to prepare and e-file their federal and state returns for free, was discontinued on April 1. Taxpayers with simple tax returns can still prepare and e-file a federal tax return using TurboTax Federal Free Edition, but they’ll pay $29.99 to prepare and file a state tax return.

On Wednesday, Sen. Elizabeth Warren, D-Mass., introduced legislation that would require the IRS to offer free online tax preparation and e-filing to taxpayers. The bill would also direct the IRS to offer a return-free option to taxpayers with simple tax returns. Taxpayers would receive a return prepared by the IRS, using information provided by employers and financial institutions. If they agreed with the numbers, they would sign the return and send it to the IRS.

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"Congress should be making it easier for Americans to file their taxes each year, not bowing to the interests of the tax prep industry," Warren said. "The Tax Filing Simplification Act is a commonsense bill that would help taxpayers all across this country file their taxes with less stress and fewer costs, and it would push the IRS to use the authority it already has to simplify Tax Day for all Americans."

But for this year, you might still be eligible to prepare and e-file your federal tax return for free. Just be sure you read the fine print before you start plugging in numbers, because some “free” offerings come with strings attached. Consider:

IRS Free File

The IRS currently offers free filing through a partnership with private tax software providers, but not everyone qualifies. To use this program, your 2015 adjusted gross income must be $62,000 or less.

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Even if you meet the income threshold, you won’t qualify for every free offering. TurboTax All Free, for example, is limited to users with AGI of $31,000 or less, unless they’re active members of the military, in which case they can have AGI of up to $62,000. TaxAct Free File is limited to taxpayers with AGI of $50,000 or less who are also age 56 or younger or eligible for the Earned Income Tax Credit. Active members of the military can have AGI of up to $62,000 and qualify.

Some Free File programs offer a free state tax return, others don’t. Jackson Hewitt offers a free federal tax return for anyone who is 49 or younger (or qualifies for the EITC) and had AGI of $62,000 or less, but charges $19.95 for a state tax return.

Free File Fillable Forms

If you don’t qualify for IRS Free File but have a fairly straightforward return, consider Free File Fillable Forms. This program allows you to fill out your tax return electronically and e-file it, or mail it in. The program will do the math but doesn’t offer guidance or advice, and it doesn’t include a state tax return.

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Free options for federal returns

If you’re ineligible for Free File but want more hand-holding than the fillable forms provide, you may still be able to prepare and file your federal tax return for free. In addition to the TurboTax Federal Free Edition, taxpayers with simple returns can use H&R Block’s Free Edition (www.hrblock.com/online-tax-filing/free-online-tax-filing). You can prepare and e-file a federal return for free; a state tax return costs $29.99. TaxAct offers a free federal return for taxpayers who file a 1040EZ or 1040A, with no charge for a state return. TaxSlayer’s Free Basic edition is limited to 1040EZ; a state tax return costs $28.99.

It’s easy to confuse these programs with those offered through IRS Free File. But there’s an important difference: all federal tax forms are included in Free File programs. If you itemize, or even own a small business, you can use Free File, provided you meet the other criteria.

Help from a human

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If you made $54,000 or less last year, you may qualify for free tax help from the IRS Volunteer Income Tax Assistance (VITA) program. Through this program, IRS-certified volunteers help taxpayers prepare their tax returns for free. At some locations, qualifying taxpayers can also e-file their returns through one of the IRS Free File software partners.

A separate program, Tax Counseling for the Elderly (TCE), provides assistance to taxpayers 60 and older and specializes in pensions and retirement-related tax issues. The AARP Foundation’s Tax-Aide program provides tax-filing help as part of TCE and is open to taxpayers 50 and older who can’t afford professional help.

VITA and TCE sites are usually located in community centers, libraries, schools and shopping malls. To find a VITA or TCE center, go to irs.treasury.gov/freetaxprep or call 800-906-9887. You can also locate a TCE site at www.aarp.org/applications/VMISLocator/searchTaxAideLocations.action or by calling 888-227-7669.

See Also: 9 Tax Breaks for the Middle Class