Bankrate's 2009 Tax Guide
Filing & refunds
taxes
New free filing option for more filers

If you've never filed your tax return electronically, then 2009 might be the year to get with the e-program that kicks off on Jan. 16.

Not only will 20 private tax preparation software companies be providing their services via the Free File program, but the IRS itself is dipping its toe into the direct tax-filing water.

With the traditional Free File method, taxpayers whose adjusted gross income in 2008 was $56,000 or less can sign onto the IRS site, pick a vendor, prepare their returns and then file them for free.

New this year, taxpayers can choose to use online "fillable" forms and then send those directly to the IRS, also at no cost.

There is no software associated with the new fillable forms, which are electronic reproductions of commonly used IRS paper forms, so you must know what to type into the document that appears on your computer screen. However, this option is available to any filer, regardless of income.

E-filing advantages
"Particularly this year with the economic situation, many taxpayers will be focused on getting their refunds as quickly as possible," says David Williams, IRS Electronic Tax Administration Director. "By e-filing, they could get that refund in as little as eight to 10 days. If it's a mailed paper form, it could be four to six weeks."

That quick turnaround time is e-filing's major attraction. Last year, says Williams, 80 percent of returns produced refunds, with the refund amount averaging $2,429. Getting such a large refund is "not necessarily the best financial bargain," says Williams, "but people are very, very happy to get those refunds, so most of our focus in filing season is to get those refunds out as quickly as possible."

E-file and Free File 2009 basics
  • The IRS will begin accepting e-filed returns on Jan. 16.
  • The 2009 Free File program also begins Jan. 16.
  • To use Free File this year, your 2008 adjusted gross income must be $56,000 or less.
  • The income cut-off applies regardless of your filing status.
  • 20 tax software companies are part of Free File 2009.
  • Three companies are offering Free File products in Spanish.
  • You can e-file your return at any time and schedule any payment of taxes due for a later date, up to the April 15 deadline.
  • Access Free File only by going to the IRS Web site, www.IRS.gov, and clicking on the Free File icon.

Those e-filing advantages, says Williams, are why last year the IRS received 86 million returns, or nearly 60 percent of all filings, electronically. That was an increase over 2007 figures, although Williams acknowledged that the figure likely was inflated because of the additional filings submitted in order to receive an economic stimulus payment.

"We're hoping to keep momentum for this filing year," he says. "We think we have the right filing formula for doing that."

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Free File for some
Although there is an income eligibility limit of $56,000 or less, Williams says that amount still allows around 100 million filers, or 70 percent of the taxpaying population, to use one of the 20 tax software packages that will be part of this year's Free File program.

The Free File software versions are similar to the products that the software companies offer for sale. Most use an interview-based format so you don't have to know all the intricacies, tax changes, forms and instructions of the filing process. You answer the question and the software does the rest, including correcting basic tax errors.

"We've ask the software companies to support a set of core forms, ones that are most likely to be used by folks who qualify for Free File," says Williams.

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