Monday, 4 March 2024

70% of Americans Are Eligible to File Their Taxes for Free — But Last Year, Only 3% Did

by Earn Media

70% of Americans Are Eligible to File Their Taxes for Free -- But Last Year, Only 3% Did

Image source: Getty Images

Filing taxes can be a bit of a hassle. You have to gather paperwork, figure out whether to itemize versus claim the standard deduction, and then, for some people, fork over some money to get your return done. That money could come in the form of purchasing tax software or using the services of a tax professional. But not everyone has to pay to file a tax return.

In 2023, an estimated 100 million Americans were eligible to take advantage of the IRS Free File program, which gives filers access to no-cost tax software. Yet last year, only 3% of those who were eligible to file a free tax return used that option, according to the Free File Alliance. As such, it pays to see if you’re able to file your taxes for free this year.

It’s a matter of income

The IRS Free File program is designed to throw lower and moderate earners a bone.

You can qualify to file your taxes for free if your adjusted gross income was $79,000 or less in 2023. From there, you’ll get access to different software options, some of which offer free state filings as well as federal filings.

The nice thing about these software programs is that they’re designed to help you snag tax breaks you may be entitled to. For example, depending on factors like your income and listed dependents, you may be prompted to claim certain money-saving tax credits.

Should you file your taxes for free?

Even if you’re eligible for the IRS Free File program, there are some situations where it could pay to hire a tax professional rather than go it alone. Let’s say you opened a small business in 2023. Your income may be low enough to qualify to file your taxes for free. But you may be subject to certain reporting requirements you aren’t aware of, which is why it could make sense to use a professional.

Also, if you own a business or are self-employed, there are certain tax deductions you may be eligible to claim. But it’s a good idea to work with a professional to determine which expenses you should and should not be writing off, especially if it’s your first time claiming work-related expenses.

To be clear, the IRS Free File program isn’t limited to filers who claim the standard deduction. You can use the program even if you itemize. Rather, it’s when you’re looking at a complex tax situation that paying for help starts to make sense.

You might, for example, pay someone $300 or $400 for tax help. And that might seem like a lot of money to spend when a free filing option exists.

But if your tax professional scores you an extra $900 back from the IRS that you never would’ve known to claim yourself, then it’s worth the fee. So while it definitely pays to explore the Free File program if you think you’re eligible, you should also be honest about your situation and be willing to spend the money for professional help if it leads to a more accurate return.

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