Free File is a service available through the Internal Revenue Service (IRS) which allows U.S. taxpayers to prepare and e-file their federal tax returns for free, either through brand-name software or online fillable forms. Free File is managed and operated by the Free File Alliance, a consortium of private tax-preparation companies. The service is available through the IRS's website at www.irs.gov/freefile. Although the service is accessed via the IRS website, the Free File service is not managed or operated by the IRS. Free File provides two options to tax payers: Free File software, or Free File Fillable Forms. More than 46 million people have used Free File since its debut in 2003. For 2016, IRS Free File will be available January 15 through October 15.
Free File History
In November 2001, the U.S. Office of Management and Budget's (OMB) Quicksilver Task Force established 24 e-government initiatives that were a part of the President's Management Agenda. These initiatives were designed to improve Government to Government, Government to Business, and Government to Citizen electronic capabilities.
One initiative, IRS Free File, instructed the IRS to provide free and secure online tax return preparation and filing services to taxpayers. In accordance with this OMB directive, the IRS began working in partnership with the tax software industry to develop a solution. The result was the formation of the Free File Alliance, LLC, a group of tax software companies who provide free commercial online tax preparation and electronic filing services.
Free File Alliance
The Free File Alliance is a consortium of 13 commercial tax preparation software providers who offer their brand-name tax software products for free. Each member is allowed to set eligibility requirements for their software products. However, the cumulative offers must allow 70 percent of U.S. taxpayers - approximately 100 million people - to be eligible for at least one product. Each year, the income limit for eligibility is adjusted to reach 70 percent of the taxpayers. For the 2016 tax season, anyone who has an adjusted gross income amount of $62,000 or less will be able to find at least one software product for their use. Agreements between the IRS and the Free File Alliance are publicly available. The latest Memorandum of Understanding was signed in 2015 and runs through 2020.
Free File Software
One component of Free File is the Free File Software program, which allows lower-income tax payers to use name-brand tax preparation software to prepare and file tax forms for free.
For 2016, anyone whose adjusted gross income is $62,000 or less will be eligible for at least one software product. There are 13 products from which to choose. Each software provider sets its own eligibility requirements, generally related to income, state residency, age, military service or eligibility for the Earned Income Tax Credit. Free File is free for federal tax returns only. However, some Free File Alliance members offer state return software for a fee or for free. Most of the software products, but not all, use an interview format in which you are asked questions and your answers are used to populate the electronic form. This format helps taxpayers get the tax credits and deductions they are due. It also means taxpayers do not have to be experts in income tax law. Alliance members cannot sell any refund anticipation loan products through the Free File service. Alliance members are limited in the number of times they can offer to sell other products.
To use IRS Free File, taxpayers must go through the IRS website at IRS.gov/freefile. At www.irs.gov/freefile, taxpayers can find a tax software product one of two ways. They can review a list of companies and their offers. Or, they can use a simple web tool that asks a few questions - such as income, state residency and age - and the tool will locate those software products for which taxpayers are eligible. Once a taxpayer chooses a product, they will be directed off the IRS.gov site and onto the Alliance member's website to complete their federal tax return. All Alliance members use the latest in secure technology to protect taxpayer information and to transmit returns to the IRS.
Free File Fillable Forms
Another component of Free File is Free File Fillable Forms, which is available to all taxpayers, including taxpayers whose incomes are greater than $60,000. It is an alternative to Free File Software, although both are free. Free File Fillable Forms is operated by a private organization, the Free File Alliance and not the IRS. Though IRS links to it, they do not endorse it or any product.
Free File Fillable Forms is an electronic version of IRS paper forms. Free File Fillable Forms does not include any elaborate cross-checking or question-and-answer formats (such as is found in many of the Free File Software packages), instead it is a simple fill-in-the blank format (however, it does perform math calculations). Free File Fillable Forms is best for taxpayers who are comfortable preparing their own tax returns or who have been long-time paper filers. There are no income restrictions for using Free File Fillable Forms. It does not support any state tax returns. It provides free electronic filing. Free File Fillable Forms is managed by the Free File Alliance.
Free File Popular with Users
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The IRS has conducted several studies of Free File users. Their satisfaction with Free File is very high. Some 98 percent of Free File software users said they would recommend the product to a friend or family member. And 92 percent reported they intended to be repeat users.
States and Free File
Some states have formed their own agreements with some Free File Alliance members. Their arrangements are separate from the national agreement between the IRS and the Free File Alliance, which applies only to federal tax returns. Generally, people must prepare their federal tax returns before they can prepare their state tax returns.
These states have state Free File programs:
Arizona, Arkansas, Georgia, Idaho, Indiana, Iowa, Kentucky, Michigan, Minnesota, Mississippi, Missouri, North Carolina, North Dakota, Oregon, Pennsylvania,Rhode Island, South Carolina, Vermont, Virginia and West Virginia, plus District of Columbia.
- IRS.gov, www.irs.gov/freefile
- "About the Free File Alliance". IRS. Archived from the original on 2011-06-29.
- Free File Alliance Homepage
- IRS News Release, IR-2010-5, Jan. 15, 2010,Free File Now Available to Almost All Taxpayers; Software Can Help Find New Economic Recovery Tax Breaks that Could Be Overlooked
- IRS.gov, 2008 Free File Survey