taxes

Tax season officially opens, with e-file and Free File available to taxpayers

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Couple working on their taxes in living room | Monkey Business Images/Shutterstock.com

Monkey Business Images/Shutterstock.com

Ready to file your tax return? The IRS is ready to accept it, whether you file electronically or with paper via snail mail. Jan. 23 marks the official start of the tax season.

More than 153 million people are expected to file a return in 2017, with 80 percent projected to prepare their returns electronically using tax preparation software, according to the IRS.

But don't expect a quick refund if you're claiming the earned income tax credit or the additional child tax credit. A new law requires the IRS to hold refunds for taxpayers claiming these credits for a few weeks to curb fraud by scammers targeting these credits.

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Free File also open

In addition to now accepting paper and electronically filed returns, the IRS has opened the e-door to its Free File option. This online, no-cost tax return preparation and electronic filing option began enabling taxpayers to submit forms on Jan. 13, though the IRS won't accept the returns until the official start date.

As in prior years, Free File is open to taxpayers whose income meets the eligibility limit. This filing season, more taxpayers should be able to use the free online filing option. In fact, 70 percent of all taxpayers can do their taxes for free, according to the IRS. The income eligibility limit has been increased to $64,000. That's $2,000 more than last year.

Free File 2017 basics

  • You can file your 2016 tax return through Free File if your adjusted gross income is $64,000 or less.
  • The income cutoff applies regardless of your filing status.
  • Free File is for individual, not business, tax returns. However, a sole proprietor who files Schedule C with Form 1040 can use Free File.
  • Some participating Free File vendors also offer free state tax return preparation and e-file.
  • Some Free File companies offer free electronic extensions. But remember, you still must pay any taxes due by the April 18 deadline or you'll be charged interest and possibly penalties on any tax you owe.
  • You do not download anything. All of the software, which is encrypted to protect privacy, remains at the Free File company website you select, and your return is filed from there.
  • Access Free File by going to IRS.gov and clicking on the Free File icon. Beware of offers by outside websites to take you to the Free File website, as they could be scams operated by identity thieves.

The Free File program is a partnership between the IRS and the Free File Alliance, a group of tax preparation software manufacturers. For the past few years, more than a dozen companies have participated in the annual free filing program.

Free File was created in 2003 as a way to get more people to e-file. Its target is taxpayers who might otherwise not e-file because they don't want or can't afford to pay the cost of the computer filing programs or professional tax help.

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Other qualifications

The key Free File qualification factor is the income level of $64,000 this year. That amount applies to all taxpayers, regardless of filing status.

Participating tax software companies also can establish other eligibility requirements. Some may limit usage of their programs based on geographic location, military service or other criteria.

To determine which software best fits your filing needs, the Free File website includes an online search tool to help you select one of the participating Free File companies.

Fillable forms available

While Free File is available to 70 percent of taxpayers, the other 30 percent who make too much money can still file taxes at no cost.

Free File offers any taxpayer, regardless of income, the option to use online fillable forms to do their taxes. These are the most commonly used tax forms. You can open them on your computer and enter your tax information. Once you're finished, you can file the fillable forms for free.

The fillable forms offer only basic calculations of what's entered on the form. And you must figure out what goes on the form without the online prompting found in software.

Also, the information is not automatically transferred to associated forms. That means you must, for example, manually enter your itemized deductions total from Schedule A to the appropriate line on Form 1040.

Still, taxpayers who don't qualify for full-fledged Free File but who have relatively simple filing needs and don't want to buy tax software might find fillable forms a welcome alternative.

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Free File contributions to e-filing

Last year, almost 132 million tax returns were filed electronically, according to IRS data complete through Dec. 2, 2016. That represents an increase of more than 2 percent in e-filed returns over the previous year. The sector that showed the most growth last year, according to IRS statistics, was tax returns prepared and filed by taxpayers on their own.

More than 46 million returns have been filed through the Free File program since it began in 2003.

"We would love to have more," says Tim Hugo, executive director of the Clifton, Virginia-based Free File Alliance, but he points to the program's overall contribution to e-filing.

"We get people in the door for e-filing, people who've never e-filed before," says Hugo. "They may go to a commercial product later on, but they will continue to e-file. We are very pleased with that."

Hugo says the program also has evolved to meet taxpayer needs. "We look at Free File as a three-legged stool," he says. "There is the traditional Free File, fillable forms and VITA providing services to every income."

Working with VITA

The filing needs of lower-income taxpayers are addressed through Free File's continuing partnership with the federal Volunteer Income Tax Assistance program, popularly known as VITA.

VITA tax-filing clinics are set up each year in public places -- from libraries to community centers to shopping malls. Its volunteers provide free filing assistance to low- and moderate-income taxpayers who might not be able to afford tax software or professional filing help. This filing season, the services of IRS-certified VITA volunteers are available to people who make $54,000 or less.

"You can do your return there or partially do your return and, if you need help, ask a VITA volunteer," says Hugo. "This helps some of those who are most in need of tax help."

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State free filing

In addition, 20-plus states and the District of Columbia also participate in a similar free filing program. In those jurisdictions, some VITA and Tax Counseling for the Elderly, or TCE, sites are making Free File available to eligible taxpayers.

IRS-certified volunteers staff these filing programs to help taxpayers complete and e-file their returns.

You can find a self-help VITA or TCE location at the IRS website by searching for "VITA." If you prefer, use the locator tool or call toll-free at (800) 906-9887 for VITA location information or (888) 227-7669 to find a local TCE site.

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