Taxpayers who want to take advantage of the Internal Revenue Service's free tax preparation e-filing program won't have to wait. The Free File program opens to taxpayers on Jan. 17, two weeks before the IRS starts processing 2013 tax returns.
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The IRS will not start processing any tax returns until Jan. 31. The government shutdown in October 2013 slowed IRS updates of forms and tests of its computer systems, leading officials to push the official opening of this year's filing season to the end of the month.
But that doesn't mean taxpayers have to sit around. Free File companies will hold taxpayers' completed tax returns and then submit them on Jan. 31.
The early opening of Free File is good news for millions of eligible taxpayers. They are among the group of electronic filers, which increases every year, primarily because they can get their refunds more quickly.
And for the 2014 filing season, a few more taxpayers should be able to use the Free File option. The income eligibility limit has been increased to $58,000. That's $1,000 more than last year.
Free File 2014 basics
- You can file your 2013 tax return through Free File if your adjusted gross income is $58,000 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 15 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. Fourteen companies are expected to participate in the program this filing season.
"All the (2014 filing season tax software companies) have done it before. We have experienced providers within the commercial world and the Free File world," says Tim Hugo, executive director of the Clifton, Va.-based Free File Alliance.
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.
The key qualification for Free File services is income. This year, taxpayers with adjusted gross income of $58,000 or less, regardless of filing status, can use the online program.
Participating tax software companies 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.
Free File contributions to e-filing
In 2013, almost 144 million tax returns were filed electronically, according to IRS data complete through May 2013. That represents a nearly 2% increase 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.
Around 3 million of those self-prepared returns e-filed last year came through Free File, says Hugo. That number has held steady for the past few years.
Three million of those returns e-filed last year came through Free File, says Tim Hugo, executive director of the Clifton, Va.-based Free File Alliance.
"We would love to have more," says Hugo, but he points to the program's overall contribution to e-filing. Since its inception, says Hugo, Free File has accounted for the submission of more than 40 million federal returns.
"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 $52,000 or less.
Hugo says Free File is again placing kiosks, similar to self-checkout stations in retail stores, at VITA sites nationwide.
"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."
The IRS has an online search tool to help taxpayers locate a nearby VITA site. Taxpayers also can call (800) 906-9887 for VITA locations.
Free fillable forms remain
The IRS says that Free File is available to 70% of taxpayers. But if you are among the 30% making too much money to use the service, you still can file for free using the tax agency's fillable federal return form option.
Here, online versions of the most commonly used IRS tax forms are available through the Free File page. You fill them out on your computer and then e-file the documents at no charge.
Just don't mistake the forms for tax software.
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 with relatively simple filing needs who don't want to buy tax software might find fillable forms a welcome alternative.
Note, however, that you'll have to wait a bit longer to use the free fillable forms option. They won't be available until Jan. 31, the same day that the IRS opens its filing doors to all taxpayers.
Copyright 2014, Bankrate Inc.