What Is Irs Free File
The IRS Free File Program is a public-private partnership between the IRS and many tax preparation and filing software industry leaders who provide their brand-name products for free. It provides two ways for taxpayers to prepare and file their federal income tax online for free:
- Traditional IRS Free File provides free online tax preparation and filing options on IRS partner sites. Our partners are online tax preparation companies that develop and deliver this service at no cost to qualifying taxpayers. Please note, only taxpayers whose adjusted gross income is $72,000 or less qualify for any IRS Free File partner offers.
- Free File Fillable Forms are electronic federal tax forms you can fill out and file online for free. If you choose this option, you should know how to prepare your own tax return. Please note, it is the only IRS Free File option available for taxpayers whose income is greater than $72,000.
Find what you need to get started, your protections and security, available forms and more about IRS Free File below.
The IRS does not endorse any individual partner company.
- A copy of last year’s tax return in order to access your Adjusted Gross Income
- Valid Social Security numbers for yourself, your spouse, and any dependent, if applicable
Income and Receipts
Taxes Are Too Complex
The popular press makes taxes seem complicated by quoting politicians demanding reform and referencing just how many volumes the tax code fills. In reality, the vast majority of taxpayers don’t have to worry about most of the tax code, which applies to very specific situations.
Although times are changing, most American taxpayers still hold a “traditional” job, work for an employer, and receive a W-2 filled with tax information at the end of the year. Patrick Summar, a Redondo Beach, California-based business and life coach for business owners, says that for the typical employee, taxes need not be overly complicated.
“There will always be situations in which hiring outside help makes sense, particularly if you run a business or have extensive investment assets,” says Summar. “But if you are the employee of someone else’s business with no outside investments, then keep it simple, because it is simple!”
While you shouldn’t avoid itemizing if you have the requisite expenses, for most taxpayers this isn’t an issuemore than half of all taxpayers don’t even itemize deductions, using the standard deduction instead. This makes doing your own taxes a much simpler process.
How Can I Prepare To Do My Own Taxes
Though using an accountant or a professional tax preparer has some conveniences, preparing your own taxes allows you to maintain full control over the process. You can work at your own pace and save the money you would have paid to a tax preparer. As such, many people choose to do their own taxes each year.
Doing your own taxes should begin with preparation before you even sit down with tax documents and receipts. First, make certain that you have all the necessary forms and schedules. In the United States, you can request the forms and schedules you need from the Internal Revenue Service by phone or online.
You may want to consider using tax preparation software to prepare your taxes on your home computer. If you use tax software, you won’t have to worry about securing the proper forms. Tax forms and schedules are typically included with the software. If necessary, you can even updated forms over the internet and import them into the program.
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Stay Organized Throughout The Year
Designate one place to keep all tax documents and add to it throughout the year. This could include a file folder, box or other compartment in a secure location. Add tax records receipts for charitable donations, bank interest statements, W-2s, 1099s, etc. as you get them. That way you wont have to dig around for lost documents or proof of expenditures when you want to file your taxes.
You should keep records for items of income, deduction or credit shown on your tax return until the period of limitations runs out. For many records that means three to seven years, but be sure to verify IRS recommendations before shredding any documents.
How To Estimate Your Income Tax Bill As An Independent Contractor
Becoming an independent contractor in Canada has many advantages, but it does put the onus on you to properly estimate and remit income taxes on a regularly scheduled basis as dictated by the Canada Revenue Agency . “How do I pay income tax as an independent contractor in Canada?” is a common question for new entrepreneurs.
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How To Calculate Your Taxes
If you work as an employee, your employer will send you a Form W-2 in the mail and possibly electronically. This documents all the details related to your pay, deductions, and other elections made during the tax year.
It includes your gross pay, pay withheld and remitted to the IRS, as well as other money used to pay for various deductions like your 401, health savings account , life insurance, and more.
If you’re self-employed, you should expect to receive 1099-NECs from any company that paid you $600 or more during the tax year. Once you gather all of this information, you’ll also need to track all of your receipts and other documents substantiating your costs of doing business.
One way to avoid paying income taxes is through investing in assets that pay qualified passive income. These are some of the best assets to invest in because you can receive income but not pay taxes on it.
Such examples include qualified dividend income, municipal bond income, or long-term capital gains on the sale of certain assets. For these to be tax-free, you’ll need to have income below certain levels, however.
Doing Your Own Taxes Here’s What You Need To Know
More than 43.6 million Americans prepared and e-filed their own income tax returns in 2013, up 4 percent from the year before, according to the IRS. In addition to being more affordable than a storefront or accountant, online and mobile solutions have made doing your own taxes exceptionally easy and fast.
Consumers now have everything for filing their own tax returns right at their fingertips, says TaxAct spokesperson Jessi Dolmage.
The programs ask simple questions, covering tax law changes and maximizing your credits and deductions. After e-filing, you can be notified when your return is accepted by the IRS, and solutions like TaxAct help you check the status of your federal refund.
The process is already easy and fast when doing your taxes online or with a mobile app, but to make it even more of a cinch, follow these tips:
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How Much Are You Willing To Spend
There are costs to doing your taxes yourself your time, any software you may use and mistakes you may make that could end up resulting in fees and fines. Popular tax software or online programs typically cost $25 to $120, plus a bit more for state filing, depending on the type of return. If your adjusted gross income is less than $72,000, you can use the IRS Free File to prepare and file your taxes at no cost.
Paying a tax professional relieves you of the burden of investing time, but it still has a cost. According to Investopedia, the average fee for hiring a tax professional is $146 – $457, depending on the type of work done.
Consider A Free Online Tax
When doing your own taxes, you could do it by hand and mail in your return, or you could choose to e-file. For speed, accuracy and convenience, its hard to beat e-filing. Plus if you pair e-filing with direct deposit, youll probably get your refund faster than filing paper forms by mail.
Plenty of software providers and online services provide e-filing. Some may advertise free filing, but often theres a catch. Some allow you to file your federal return for free but then charge you for the state return. Some allow you to file for free if you take the standard deduction but charge you if you want to itemize. And some may even charge you if you have income reported on forms other than W-2s.
There can be many caveats to free filing software, so its important to understand what fees you might end up paying.
Remember, is entirely free. You can file both your federal and single-state tax returns without income restrictions. You can work for an organization or for yourself or both. You can itemize or take the standard deduction. With Credit Karma Tax®, these differences dont trigger a fee of any kind.
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How To Reduce Your Taxable Income
Now that you know a bit about the income side of the ledger, you might want to learn a bit more about how you can lower this income in the eyes of the IRS.
Aside from having certain types of income, the IRS awards better taxation preferences. You have two levers to lower your taxable income: tax deductions and tax credits.
Why Do I Have To File A Return
You have to file a tax return because you’re probably a taxpayer. The IRS considers taxable income as all income from whatever source derived, including gains realized, unless otherwise excluded.
If you have enough income, the IRS looks to tax in one year to exceed the standard deduction for your filing status. Then it’s time for you to do your taxes on your own and file that return with the appropriate government agency. If not, you might still consider filing a tax return.
One of the significant learnings from 2020 and 2021 has been the value of filing your tax return regardless of need. Filing a return allowed millions of people to receive each of the three rounds of stimulus checks that came out due to the pandemic.
Therefore, you’ll want to save the correct paperwork to prepare your taxes, even if you don’t exceed the standard deduction and don’t technically need to file.
If you exceed the standard deduction, filing your return gives you the chance to reconcile your tax bill with the IRS. You might have overpaid through paycheck withholdings, entitling you to a tax refund you can spend how you please.
Likewise, you might have underpaid and need to cut Uncle Sam a check. Not the best scenario, but better than having the full brunt of the federal government come after you for the money you owe.
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Understand How Your Taxes Are Determined
The government decides how much tax you owe by dividing your taxable income into chunks also known as tax brackets and each chunk gets taxed at the corresponding tax rate. The beauty of this is that no matter which bracket youre in, you wont pay that tax rate on your entire income.
The progressive tax system in the United States means that people with higher taxable incomes are subject to higher federal income tax rates, and people with lower taxable incomes are subject to lower federal income tax rates.
Your Decision Could Determine How Rewarding Or Draining Tax Season Will Be For You
There comes a time every year when you’ll have to pop the big question: Should I file my own taxes or hire a professional? The answer usually defaults to the infamous response: “It all depends.” Life changes could affect the credits and deductions you qualify for and what new tax forms you’ll have to add to your list.
Since hardly anything having to do with taxes is ever as straightforward as we would like it to be, here are some items to consider when evaluating if it makes sense to do your own taxes or hire a professional.
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Make The Decision Easier
There’s no need to guess whether you should do your taxes when you have the information at your disposal to make an educated decision.
First, gather all your documents to see what you are working with. Pull out last year’s tax return, your W-2s, your Form 1099s, and all the other tax documents you received.
Here are some questions to consider:
- Did you receive any new forms this year?
- Do you have a basic understanding of the tax return?
- Are you familiar with the most common tax forms you’ll need to use?
- Did you get married, get divorced, have a baby, or experience any other changes that could affect your filing status?
- Do you plan to file your taxes electronically?
- How much time do you have to allocate to tax preparation?
- What are the potential costs?
Go through this checklist to help make your decision less stressful. If you find that your tax situation hasn’t changed since last year, there’s nothing wrong with completing your own tax return if you have time available to do it. But if you’re already spinning your wheels looking at all the various tax documents, you may be better off hiring someone else to take all the tedious tax work off your plate.
Do Your Own Taxes Or Hire A Tax Professional
Figuring out how to do your own taxes can seem complicated, but the alternative of hiring a pro can be costly. Here’s some help deciding.
When it comes to tax preparation, it is good to know your options. Efile.com states that in 2020 , over 71 million taxpayers prepared and efiled their tax returns. The IRS offers several tax season tips and ideas to get you started. Many Americans choose to turn to a tax professional for help. The decision to file yourself or get assistance may depend on your circumstances, time and budget. Here are some questions to consider that may help you decide.
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Time Flies When Youre Having Fun But While Tax Preparation May Not Be Anyones Idea Of A Good Time It Doesnt Have To Be A Slow Painful Process Either
You might think completing and filing your own income tax return would be more difficult than handing everything over to a paid tax preparer. But with the right approach, and a few simple tips, you can learn how to do your own taxes and save yourself some time and money to boot.
Canada Pension Plan Payments
In addition to income tax, you are required to make contributions to the Canada Pension Plan if your income is greater than $3,500 in a given year, even if you are self-employed. The rate for CPP contributions in 2021 is 10.9%, up to an annual maximum of $6,333 .
When making quarterly installment payments you can include an additional amount for CPP contributions based on your annual income, or pay the assessed amount for the year when you complete your tax return.
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How To Find A Good Tax Preparer
Start with word of mouth, says Schieck. Find someone who is in a similar tax situation as you and get the name of their tax preparer. Check their professional certifications and see if there are areas they specialize in, such as corporate or cross-border taxes.
But dont ignore the intangibles, she adds. If you get a bad feeling when you sit down with someone, even if that person comes highly recommended from a friend whom you really trust and admire, you should probably nope out. I would say, honestly, go with your gut, says Schieck. Its never good to start a professional relationship like that.
Also, make sure you and your future tax preparer are vibing when it comes to risk tolerance for audits. Some accountants will tell you that you can write off everything, says Schieck, because they think the chances of you being audited for those expenses are very slim. But you might not be comfortable with that.
Remember: This is a potentially long-term relationship so make sure that youre very comfortable with each other.
And, should you decide the best person to prepare your taxes is you, then congratulations!
Either way, there is no reason to be scared by the tax-filing process.
What does the * mean?
Why Was The Free File Alliance Formed
In November of 2001, the Office of Management and Budget’s Quicksilver Task Force established 24 e-government initiatives that were a part of the President’s Management Agenda. These initiatives were designed to improve government to government, government to business and government to citizen electronic capabilities.
One initiative, IRS Free File, instructed the IRS to provide free and secure online tax return preparation and filing services to taxpayers. In accordance with this OMB directive, the IRS worked in partnership with the tax software industry to develop a solution. The result was the formation of the Free File Alliance, LLC.
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