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In preparation for the 2024 tax season, the IRS has expanded its Free File program. In 2023, anyone with an AGI of $79,000 or less can submit their federal taxes online for free with guided tax preparation. This was the program’s most significant annual boost in 22 years, rising from $73,000 last year.
Photo from Money
Free Tax Filing: IRS Expands Eligibility, Yet Only 2% Seize the Opportunity
The IRS typically raises the income cap by $1,000 to $2,000 annually. The IRS and eight partner organizations, including 1040.com, FreeTaxUSA, and TaxAct, offer free tax prep and e-filed returns to qualified individuals. IRS Free File is available to anyone with an AGI over $79,000; however, partner companies’ guided tax software is not. They can file their taxes using the IRS’s fillable forms.
Despite its tremendous expansion, the Free File Alliance reports that barely 2% of taxpayers use IRS Free File. The IRS and private tax prep companies formed this nonprofit collaboration in 2002 to offer low-to-middle-income taxpayers free guided tax prep and e-filing.
Use IRS Free File tax software to gather income documents like W2s and 1099s. Users can choose from eight IRS partners based on eligibility and follow the steps. The IRS’s Free File Fillable Forms, opening later this month, allow manual entry and rudimentary calculations for anyone with an AGI above the threshold.
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Tax Filing Amid Strained Relations with Tax Giants
In particular, the IRS is creating Direct File tax software for all taxpayers. The IRS and private tax corporations like H&R Block and TurboTax have strained relationships, prompting this move. Following lawsuits and deceit charges, mega tax-prep firms left the IRS’s free e-filing program.
In preparation for tax season, Direct File is in beta testing. The IRS will ask taxpayers to test the software next month, then expand to all taxpayers in certain states later in the tax season. Direct File offers state income tax return filing.
Treasury Secretary Janet Yellen called Direct File an “impressive product” and said the IRS will test and learn from taxpayers in 2024 with a limited pilot program.
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