Tax planning and compliance for investors
Free Online Guides
By Kaye A. Thomas
Posted January 31, 2011
Free online return preparation and electronic filing is available for everyone.
The best way to file your tax return depends on your situation. A majority now use professional preparers, but many could get the job done just as well, and faster, using a free online service. Whether you use a professional or not, here are our thoughts on the best way to proceed.
Disclosure: Fairmark.com receives compensation for recommending some of the solutions mentioned here.
It's scandalous that the IRS doesn't offer even a basic tax return preparation and filing service on their website. Fortunately, TaxACT has stepped in with a solution. Once again in 2011 they are offering their excellent online preparation and filing service free of charge to all who want to use it, without regard to age, income level or complexity of the return. TaxACT isn't quite as well known as Intuit's TurboTax or H&R Block's TaxCut, but for many years it has been a high quality product, essentially equivalent to the offerings of the other companies, but without the restrictions the others impose on free filing.
I've used this software myself, to prepare and file my daughter's tax return. It did a great job, and even caught an error I was making that would have reduced her refund.
What's the catch? If you want them to do your state or local income tax return, you'll pay a reasonable fee. Ditto if you want an enhanced version of their software that offers added features. If you choose these items, the experience won't be free, but it will still be the best bargain around. We highly recommend TaxACT.
Alternatives? Some of the other software providers offer free service, but subject to arbitrary restrictions. You may spend a lot of time getting your return set up in their system, only to learn that you need a form that isn't included in their free service. I don't know why anyone would use these other services when TaxACT offers such a fine service entirely free of charge.
Worst of all is the Free File service available through the IRS. They make it as complicated as possible to find a quality service you can use free of charge, imposing arbitrary restrictions on income levels and age. (How they get away with this blatant age discrimination at a government agency is beyond me.) They don't check the quality of the offerings, and a study found that many of them were, in a word, lousy, making mistakes that made people underpay or overpay their taxes. Free File is really designed to discourage free online filing, and that's the only thing it does well.
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