NWA-PCUG Newsletter Article, February 2011
Affiliates Again Offers Free Online Filing
By Ira Wilsker, Radio Show Host, Columnist, College Professor and deputy sheriff
iwilsker@sbcglobal.net
(click to email author)

WEBSITES:
http://freefile.irs.gov
http://www.irs.gov/efile/article/0,,id=118986,00.html?portlet=6
http://www.irs.gov/ita/index.html
http://www.irs.gov/newsroom/article/0,,id=235215,00.html?portlet=6
http://freefile.irs.gov/get-more-information.html (States that have Free Filing)

It is again that time of year that we are receiving those dreaded W-2 and 1099 forms. This year due to a local holiday in Washington, DC, we actually have until April 18 to file, rather than the traditional April 15 that we have all come to approach with trepidation. The Sunday newspaper sale books, big box stores, and online retailers are rife with deals on tax preparation software, including big discounts, rebates, gift cards, package deals where the tax software is bundled with other software; one big box store is even offering the major tax software titles with a $15 gift card and up to $1200 worth of other non-tax software programs at deep discounts, many of which are "free after rebate" (read the details in the store carefully before the purchase!). The TV and newspaper are loaded with advertisements for commercial tax preparation services, and one local tax preparer has some poor soul standing for long hours on the street corner outside of his temporary store front location, wearing a foam Statue of Liberty costume, and carrying a sign touting the tax service.

Depending on our individual circumstances, we have a lot of options that we can utilize in order to complete this annual event. Many of us still choose to use the traditional pencil and paper method to fill in the blanks on what we hope is the correct tax form. Others have decided to use one of the many independent or franchised tax services that spring up in retail stores or in vacant store fronts every spring, like mushrooms on my lawn after a heavy rain. Some choose to use the expertise of CPA's to prepare their taxes, while millions of others purchase commercial tax software to prepare their income taxes. Once again there is a free alternative available to millions of people to prepare their federal income taxes, and that is the FreeFile service offered by the 16 participating members of the IRS approved "Free File Alliance". For those who still desire to do their own tax calculations, there is also one additional IRS approved provider who offers simple online forms that can be filled in by the user, calculated by the user, and then e-filed, all for free.

Visitors to the IRS FreeFile website at freefile.irs.gov will find the process easy to navigate and use. According to the IRS, everyone, regardless of income and circumstances, is eligible to use at least some of the free online services. At the FreeFile website, the user follows three simple steps to prepare, calculate, and files his taxes. First, the IRS suggests that the user gathers last year's tax forms, as well as this year's (2010) W-2, 1099, and other tax statements. The IRS then requests that the user calculates his "AGI" or "Adjusted Gross Income" to determine which of the free services he is eligible for. Wikipedia defines AGI as the gross income " ... less allowances for personal exemptions and itemized deductions. Adjusted gross income is gross income less certain specific items." The reason for this preliminary determination is to determine the individual's eligibility for any or all of the 16 free online tax services. Individuals or families with an AGI of less than $58,000 may be eligible for the free online tax services, while those with an AGI of more than $58,000 can still use the free online forms to calculate their own taxes, and then use the free e-file service. According to the IRS, about 70% of all taxpayers are eligible for the free full-service online filing by having an AGI of less than $58,000

The second step is to either select a FreeFile provider (if eligible), or to use the free online forms. A wizard is available to help the user select a free provider, or the user can select from the list provided by the IRS. The wizard asks a few questions to determine the proper provider, these questions being your age, your AGI, your state of residence, eligibility for an earned Income Credit (if known), and if you or your spouse earned pay from the military. Answering these few questions will present the eligible user with a list of IRS approved providers who will offer complete online tax calculations and e-filing services. For the eligible user who desires to manually select his provider of free federal tax services, many of the providers will have familiar names. Some of the best known providers of the free online tax service include H&R Block (Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 51 or younger. This federal offer is valid in all states); TurboTax (Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $31,000 or less or if you are active military with an AGI of $58,000 or less or you qualify for the Earned Income Tax Credit. This federal offer is valid in all states); and TaxAct (Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 19 through 55.

This federal offer is valid in all states). Other FreeFile providers have specific state residence requirements, military pay, other lower income requirements, or age requirements. All of the free providers use sophisticated tools and strategic online interviews to properly prepare the user's taxes, and perform all of the calculations. As long as the user accurately answers the online questions, and correctly enters the requested information, all 16 of the FreeFile providers will provide accurate results. It should be noted that while all 16 providers will likely do a satisfactory job completing federal tax forms, none of them will complete state tax forms for free; most of them will complete state tax forms for a fee, typically in the $10 range, but the state fees do vary. The IRS has also compiled a list of the 22 states that have their own free filing services, and this list is available at freefile.irs.gov/get-more-information.html.

The third and final step is e-filing the tax return. All of the listed FreeFile providers will electronically file (e-file) the completed tax return utilizing a secure encrypted system, directly with the IRS. A digital confirmation receipt is generated, and the user can track the progress of his refund, if a refund is due. the user can also print a copy of his completed tax forms for his own records. The user can optionally select to have his refund (if any) direct deposited into his existing bank or credit union account, which will be deposited much faster than waiting for a paper check in the mail. According to the IRS website, users who e-file and have a refund direct deposited can expect the refund to be posted to his account in as little as 10 days. If a balance is due the IRS, the user can select to pay the IRS directly by check or money order, or for a nominal fee to pay the IRS electronically online.

The IRS has set high standards for safety and security which the Free File Alliance participants are committed to abide by. According to the IRS, the user may want to use the FreeFile service (if eligible) because it is "Fast, Safe, and Free". According to the IRS, over 30 million taxpayers have taken advantage of the FreeFile system since its inception. Available 24 hours a day and seven days a week, the FreeFile system is readily accessible, easy to use, and can provide a valuable service to the taxpayer. An entire federal tax return can be prepared and sent to the IRS from the user's computer, without the need to go elsewhere or buy anything. The system is safe and secure, and can be used by those eligible at their convenience, but remembering the April 18 deadline. For those who are eligible, and about 70% of you are indeed eligible, this FreeFile service provided by the IRS and the 16 members of the FreeFile Alliance may be a very worthwhile way to quickly complete this sometimes troubling annual task.

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