Just over half of Americans get professional help when filing their taxes, the IRS says. That can be a smart move, especially if your taxes are complicated or you’re not confident in your ability to self-file.
But tax help also comes at a price. Tax preparers earn on average $176 for helping with a basic Form 1040 and state return with no itemized deductions, per the National Association of Accountants, although that rate can vary depending on the complexity of the taxes. It also varies depending on where you live. Tax prep in New England averaged $333, while those in the South Central part of the country paid just $210. DIY-ers who opt to go it alone with tax prep software typically pay less than $100.
If the accountant or the software finds you one big deduction you would have otherwise missed, the cost can be worth it. However, it’s an unnecessary expense for many taxpayers with simple returns since there are multiple programs available that will help you complete your taxes for free, particularly if you’re a W-2 worker who doesn’t itemize your taxes. Here’s a breakdown of the available free options:
In-person assistance: If your family makes an adjusted gross income of less than $54,000, you have a disability or limited English proficiency or are in the military the IRS provides free help via its Volunteer Income Tax Assistance program. The program provides IRS-certified volunteers who offer tax counseling and are often trained to help filers understand whether they qualify for the earned income tax credit (available to most earners in the bracket) or the additional child tax credit.
VITA programs are typically run by local nonprofits, at universities or on military bases (where volunteers are trained in tax issues specific to military families). Use this IRS tool to find local programs.
The IRS also works with AARP to provide free tax counseling and services to low-income adults over age 60. Volunteers in that program have special training in pensions and other retirement-related tax issues. Use this tool to find an AARP Foundation Tax-Aide program near you.
Most in-person programs offered during specific hours provide help on a first come first served basis. You’ll need to come to the meeting prepared with all your tax documents, including last year’s tax return, Social Security cards, and a photo ID, along with W2 forms and bank statements. Find a full list of documents here.
Free online help: If your AGI is $64,000 or less, you can get free online tax prep help via IRS Free File, a partnership between the IRS and 12 tax software companies, including TurboTax and TaxSlayer, which allows consumers to use their software to file their federal taxes and many state taxes.
Each of the firms has its own restrictions beyond income on who qualifies for their service, based on things like the age and location of the taxpayer. Despite the restrictions, the IRS claims that more than 70 percent of taxpayers qualify for the service.
Taxpayers who earn more than $64,000 can file for free via IRS Free Fillable Forms, but won’t get the guidance that comes with tax software. However, there are other private options for free help.
Many online tax preparers offer free tax software for consumers, separate from the IRS Free File program, which is only available via the IRS website. The companies hope that offering such programs will earn them customers in future years, or that taxpayers will upgrade during the process when they decide they need more assistance.
Here are a few of the more high-profile options:
Turbo Tax: The online tax prep giant offers free federal and state tax prep to taxpayers who earned less than $100,000 and who don’t own a home or rental property. The program doesn’t support taxpayers who sold investments last year, have a business or 1099 income, or major medical expenses.
H&R Block: The company’s free online program supports any 1040EZ filers (typically those earning $100,000 or less who don’t have those without mortgage interest or dependents). Taxpayers who file a 1040A because of student loan interest or educator expenses, or 1040 Schedule A filers with mortgage payments, child care expenses, or medical expenses also qualify.
Credit Karma: New this year, the personal finance site has unveiled a free tax prep program that covers more 1040 filers as well as individuals with a small business or other partnership (but not those with an S-corporation, C-corporation, partnership or multi-member LLC). There’s no opportunity for upselling tax products at CreditKarma, but when you sign up, you’ll be asked whether you consent to add your tax information to your account.
If you consent (you can decline and still file your taxes), the site will use the info to help pre-fill information on your applications and look for discrepancies between your credit report and your tax return. However, it may also use that info to present you with ads for relevant financial products.
Disclosure: Author Beth Braverman wrote for the CreditKarma blog in 2016. She is no longer affiliated with the company.