If filing online for free, pay attention
By Sandra Block
USA Today
Filing your taxes electronically requires no math skills and speeds up your refund. Yet many taxpayers resisted filing electronically because of the cost. Filing the old-fashioned way cost 37 cents; filing electronically typically cost $10 or more, depending on the tax-preparation program.
But now you no longer have that excuse. If you log on to www.irs.gov and click on "Free File," you can prepare and file your federal tax returns electronically for free.
In the past, you had to meet certain age or income limits, or live in certain states, to qualify for the free deals. But this year, four tax preparers — including tax giants TurboTax and H&R Block — scrapped their restrictions.
Some tax-preparation companies in the Free File program continue to limit their offers to taxpayers who meet specific criteria. But for the first time, anyone who wants to e-file a federal tax return can do it for free through the Internal Revenue Service site.
Be advised, though, that this offer may not last. Participants in the Free File program have the right to change their offers during the tax season. So if you're eager to take advantage of the free deals, gather up your W-2s and get busy.
The IRS formed the Free File Alliance to encourage more taxpayers to file their returns electronically. Last year, about 3.4 million taxpayers used the free service to file their returns, an increase of 26 percent from the year before.
While the IRS imposes restrictions on companies that participate in the Free File program, there are lots of traps that could cost you. Among them:
• You must link to the sites through www.irs.gov. This is critical. If you link to a tax preparer's home page without going through the IRS first, you may not be entitled to a free offer.
• Some preparers may try to sell you other products. You're not obligated to buy, the IRS says.
Be wary of offers for refund-anticipation loans. These can significantly reduce the amount you get back from the IRS.
• State tax returns may not be included. TurboTax and H&R Block will prepare and e-file your federal tax return for free, but if you want to include a state tax return, you'll pay a fee. H&R Block's basic state tax product costs $19.95; TurboTax's state products start at $9.95.
There are other ways to avoid paying extra for filing your state tax returns:
• Check out www.statetaxfreedom.com, an initiative formed by TurboTax and 19 states.
• File directly through your state's Internet site. About 22 states allow their residents to file this way, says Harley Duncan, executive director of the Federation of Tax Administrators, a trade group for state tax officials. You can find out if your state offers free filing at the federation's Web site, www.taxadmin.org.
