You can likely file your taxes for free, but are doing it the wrong way

WASHINGTON (NewsNation Now) — Tax season began Friday, but many Americans are paying to file their taxes, despite the fact it should be free.

According to the IRS, 70 percent of taxpayers are eligible to do their taxes for free. However, according to data analyzed by NewsNation, not many are taking that option.

We looked at the last several years of data from the IRS and found that in the 2019 federal fiscal year (Oct. 2018-Sept. 2019), only 2.8 million returns in the U.S. were filed with the Free File program. Compare that to an estimated 100 million taxpayers who are eligible. Instead, those people paid or filed by paper.

Who is eligible and how does it work?

There are two types of Free File. For those making an adjusted gross income of $72,000 or less, the IRS has partnered with nine companies as part of the Free File Alliance.

What is Adjusted Gross Income (AGI)?

Gross income minus adjustments to income. Gross income includes your wages, dividends, capital gains, business income, retirement distributions as well as other income. Adjustments to Income include such items as Educator expenses, Student loan interest, Alimony payments or contributions to a retirement account.

IRS

TurboTax, 1040Now and TaxACT are among the members.

To use IRS Free File, taxpayers need to go to IRS.gov and use a tool to find the company best matched with their tax situation. In addition to the normal documents needed for taxes, people also need an email address and a copy of last year’s tax return.

Once the taxpayers are matched to the service, they can fill out their taxes for free. Some providers also offer free state preparation.

Free File is open for the season. The IRS won’t begin processing tax returns until Feb. 12, which is later than normal due to the pandemic. The Free File platforms are starting to accept tax returns, but won’t transmit until Feb. 12.

This year, the IRS is also recommending that taxpayers file online and use direct deposit for refunds.

For those with an income above $72,000, there are basic Free File fillable forms. Those aren’t available until Feb. 12.

The problems with Free File

It seems pretty simple. Taxpayers work with the tax service matched to them, fill out their tax return forms and file. There should be zero costs. So, why are not many people taking advantage of the program?

Reporting by nonprofit investigative news group ProPublica in 2019 found several issues with Intuit-owned TurboTax and its marketing.

First, the site was advertising “free filing” on their homepage and throughout the site. No matter what happened when ProPublica tried to file taxes, there would be a charge. Sometimes more than $200.

It turns out, you actually cannot go directly to TurboTax.com. Hidden in the support section of the site was a note that it’s impossible to find the actual free version on TurboTax’s site. Instead, people were supposed to go to TaxFreedom.com.

ProPublica later discovered code in the site that deliberately hid Turbo Tax’s IRS Free File program from Google searches.

They also found the company made people with disabilities, the unemployed and students pay more for their services after the new tax law was passed and even steered members of the military away from the free version that’s promised by the federal government.

A Senate investigative panel in June 2020 found, among other things, that “until recently, the IRS conducted little oversight of the Free File program.”

When will I get my 2021 tax refund?

For taxpayers who get a refund check, it’s normally the top question: When will I get my tax refund?

The questions is already spiking in 2021. Here’s what we know:

• Now: Many tax prep companies are allowing people to E-File their taxes and IRS Free File is open.
• Feb. 12: The IRS will begin processing returns.
• Within 21 days: Nine out of 10 taxpayers who filed online with direct deposit will receive their refund.
• First week of March: People who filed with the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC), known as PATH Act returns, will start to get refunds.
• April 15: Deadline for filing tax returns

Stimulus change

There is one notable change to the tax-filing process for 2020. If you didn’t get either of the stimulus payments or the wrong payment, you may be eligible to receive the remaining money in your tax refund.

“Given the pandemic, this is one of the nation’s most important filing seasons ever. This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible,” IRS Commissioner Chuck Rettig said in a statement.