IRS Free File: How to File Taxes for Free
- The Internal Revenue Service (IRS) has announced File Free, a new agreement that will assist those with low or moderate incomes to prepare and e-file their returns for free.
- Taxpayers with an adjusted gross income of $73,000 or less can take advantage of File Free.
- The File Free program allows lower-income taxpayers to pay fewer costs associated with filing their taxes.
The Internal Revenue Service (IRS) has announced File Free, a new agreement that will assist those with low or moderate incomes to prepare and e-file their returns for free. Although File Free has been around for years, this year, taxpayers with an adjusted gross income of $73,000 or less can take advantage of File Free.
How the IRS Free File Program Works
The IRS Free File program works by getting a tax preparer to go onto the IRS.gov website. After they do so, IRS Free File offers two filing options, guided online tax preparation and Free File fillable forms. The guided tax return preparation is done on an IRS partner site, where they provide you with the accurate tax return information.
The Free File fillable forms are available for all income levels, but no guidance is given on tax calculations, filling forms, and filing a tax return. Unless you know how to file a tax return personally, this option is not recommended as no help is available, meaning if any mistakes are made while electronically filing a tax return, an audit could be triggered.
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Now, a manual check is required to determine whether there was any wrongdoing, and it could take a while for your tax return to process. Typically, it takes around 21 days for your federal tax return application to process. However, if any complications arise, those factors could affect the length of time it takes until you receive money from the federal government. Therefore, to prevent a delay in the process, do not use this feature unless you are experienced.
To find more information about the Free File program, visit IRS.gov/freefile.
Those who use the guided tax return preparation to file online must have an adjusted gross income of less than $73,000. The adjusted gross income is calculated by taking gross income and subtracting specific deductions. The Free File program allows you to file your federal income tax return online for free, as long as you meet the outlined conditions. It is important to note some states have free state tax returns available, meaning a taxpayer will not have to pay; but not all states comply with this requirement.
Average Tax Return Cost
In 2022, the average cost of a tax return for Form 1040 with no special deductions is $220, and one with special deductions is $323. With the ever-rising living costs, saving every penny counts. Therefore, finding different ways to save money becomes an important action.
Average Tax Refund Amount
In 2022, the average tax return amount was $3,039. Since you are getting a large amount of money from the government, the most beneficial way of using this money is to spend it wisely and set yourself up for long-term financial independence.
Here are three tips that can help you gain financial stability and independence:
Invest in the Stock Market
The first way of spending your tax refund money wisely is by investing in the stock market. Typically, the stock market averages a 10% annual return, and over multiple years, this value could rise significantly based on what investments you make and how much money you invest. In addition, the more funds invested in the stock market, the more compound interest could take effect and potentially make your returns larger.
However, it can also mean that your investments could lower in value if you do not do research on them. Therefore, before putting any money into an investment, make sure you know what you are putting money into as a way to mitigate risk.
Contribute to Emergency Savings Fund
With the money coming in from the federal government, now is not a bad time to put some of that money towards an emergency fund. Sometimes, an emergency may arise where a large sum of money may be required to pay for the expenses. Therefore, when you have set funds aside beforehand, these expenses will not make as much of a difference on your financial stability.
Recommended Read: U.S. Hourly Workers' Emergency Savings are Limited
Lower Outstanding Debts
Another important way of improving your financial position is by lowering your outstanding debts. Debts can carry high-interest rates and can have a lasting effect on your finances. As a result, you improve your financial position in the long run by using the refund amount to lower your debts.
What to Expect for 2023 Tax Return
As of December 20, 2022, additional information regarding the Free File program for the upcoming year has yet to be available. Therefore, those who wish to use the Free File program to not pay tax preparation costs must wait until January 2023 to see the eligibility requirements the IRS will post on their website.
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The Money Wrap-Up
The IRS Free File program is beneficial as it helps lower-income taxpayers to save money and receive tax returns. As a result, it is essential to check the IRS consistently to see if any updates are made regarding what services they offer for taxpayers earning less than a certain threshold. Typically these services will be at a discounted rate, which will benefit you as more money can be saved.
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