Tax Season: the thought strikes fear in us all. It’s not fun to prepare your taxes. We all want to procrastinate, but delaying the pain can be expensive. Even if you get an extension for your return you still have to pay what you think you owe by the initial filing deadline.
This year (2016) the deadline is April 18 for most of the country but April 19 in Massachusetts and Maine due to holidays. Remember that failure to pay on time can carry serious penalties—up to 25% of what you owe! Again: if you file for an extension for your return, you are still expected to pay what you think you owe at the time you file for the extension.
There are free tax help services that give help both in the preparation and filing of taxes. Some have eligibility requirements but if you don’t qualify you may still be able to use free online software to do your own returns.
It is also possible to get some consideration and assistance if you are unable to pay all that you owe by the deadline. But you still have to file to get that help, even if you are primarily filing to request an extension.
Discover your program today!
Update September 2017 It may seem like an odd topic to be talking about in September, but not if you are stressing over a return that you have not yet filed. Though many of the free tax help places are not open you can get free help — at least information — from the IRS itself. If your return is overdue they recommend that you file it as soon as possible even if you can’t pay all that you owe. If you were due a refund and you haven’t filed for last year or earlier years, you risk losing that refund if you don’t file within three years. And, you could be missing out on an Earned Income Credit you didn’t even know you were entitled to. If you’re self employed your social security benefits could suffer if you don’t file and you could run into problems if you try to get a loan. So get rid of all the stress and do what you can to get your return filed. If you need some help you can call the IRS directly. Or set up a meeting with a tax help firm and see what you can learn without having to pay for help.
Update May 2017 So did you get your tax return filled out and filed on time? Great – now is actually the time to get yourself organized for next year. It seems like the next tax returns due are a long way. And who wants to think about them now anyway? A couple of suggestions that can make things easier next year. Think about what your biggest hassle was this year gathering information. Start a simple organization system – it can be as basic as a file box or some (well labeled) boxes. And as the year goes on, put papers that relate to tax topics in those files or boxes. That will mean less frantic sorting and searching next April. And, if you had trouble getting help this year, check out the resources below and put a reminder on your calendar and/or in your phone to remind yourself to make an appointment for free help early next year.
Update January 2017 Did you know that in some areas you can get free help with your taxes at your local Goodwill location? For example, Goodwill Industries of Northern Illinois has just announced free income tax preparation and also filing sites which will be operating starting Monday, January 23. They have been doing this for eight years now, working together with the United Way and with the IRS. If you’re not in Northern Illinois and/or the Goodwill locations near you aren’t offering local services you can still get some free help. Goodwill also offers an online service that offers free online filing with its My Free Taxes Program. You qualify to be able to fill out your own tax forms and file them online for free if your income is less than $64,000. Get more information on the Goodwill website.
Tax Help Cautions: First, keep in mind that there are a few things to watch out for as you look for and sign up for some free assistance with your taxes. If you use one of the online services with a free level there may be repeated attempts to get you to upgrade, at a price of course. If you have a low income and pretty straightforward finances, do your best to resist. Also be aware that different services will have different income levels and even ages that will qualify for their free service. So know the eligibility requirements before you sign up.
Free Tax Help Update September 2016 If you’ve never tried Free File (described at the end of this article) this may be the year to start. About 70% of U.S. taxpayers are eligible to use this service, but only a very small percentage have actually used it.In January 2016 the IRS introduced more free feral and free state tax options for software that can be used for free to do and file your taxes. These are from brand name software providers and you’re eligible if your adjusted gross income (AGI) is equal to or less than $62,000 (this number is higher than in previous years, so more people can qualify). And if you earned more than that (congratulations) you can use Free File Fillable Forms when the next filing season officially begins in mid-January. These are electronic versions of the IRS paper forms.
Tax Help News: Walmart has announced a new service called “Direct2Cash” (available as of Jan. 20, 2015). The service will be most helpful for those who do not have bank accounts and expect to get tax refunds. It will allow you to pick up your tax refund in a Walmart store with no fee. It's not a loan against an expected refund check — it's your actual refund. You must file your taxes using a preparer location that supports Direct2Cash, which will have a maximum preparer fee of $7. There is not yet a database of locations but many of them are Jackson-Hewitt or Liberty Tax Centers, so search for their locations near you and see if they are providing the Direct2Cash service. When you file through them your refund confirmation is sent via email; they will give you your code and you take that to a Walmart store. Give Customer Service the code and get your cash. Not bad!!
A Warning: Cash Going Away? If you avoid taxes by operating mainly with cash and not reporting some or all o your income you should know cash could go away. It won't happen soon, but there are rumblings about the possibility of going to a completely cash-less society. It will most likely start with the elimination of the $100 bill. It's the most popular bill denomination in the U.S., and it is connected to both crime and tax evasion (which is, of course, a crime). Our former Treasury Secretary Lawrence Summers has called for a global agreement to stop issuing $50's and $100's. they would not take current bills out of circulation but would stop issuing new bills. According to the Wall Street Journal there are currently 10.8 billion $100 notes in circulation, so they'll be around for a while. So just know that this all could happen and that relying on cash may not be a good long term strategy.
Now back to getting your taxes done:
The first thing to remember when looking for tax help is that this is an area where many people are vulnerable and sometimes even desperate. As a result, there are lots of services offered that don’t turn out to be free. Be careful about misleading ads and always check the url (web address) of any sites that you visit, in particular if you think you are looking at an official government site. Remember that these will be “.gov” sites, not .com or .net or other extensions. Following is an overview of trusted resources for free tax help; if what you really need is a different form of government financial assistance, see our articles on Federal Aid and Federal Assistance in the United States.
United Way: Part of the United Way organization’s mission is to promote financial stability. Part of how they do this is by offering assistance through myfreetaxes.com. They help people online, through local offices and with a mobile van tour to prepare and file their taxes at no cost. They also help people who qualify to take advantage of the Earned Income Tax Credit. This credit is available to some taxpayers who earn less than $50,000 and many people are unaware of it. The United Way has teamed with a number of businesses as well as the Internal Revenue Service itself to offer this support, so you can be confident turning to them for assistance.
AARP: Free Tax Help is also available each year from AARP (the American Association of Retired Persons). Though they have an emphasis on people over 60 years of age they also help low to middle-income people of all ages. They have official sanction from the IRS in that the IRS determines the types and complexity of the returns their volunteers can help with. And not just anyone can volunteer. Volunteers go through rigorous training and have to pass an advanced tax volunteer test provided by the IRS itself. Typically they have over 35,000 volunteers providing services at more than 5,000 locations nationwide. Assistance is often provided at public libraries. You can find a program and location near you by simply doing an internet search of aarp’s Tax-Aide and the name of your state or county. Note: check out other services and programs available for seniors in Grants for Seniors.
Turbo Tax: Turbo Tax provides software that lets taxpayers prepare their own returns by answering a series of questions regarding their income, deductions and other aspects that affect their taxes owed. The software comes in several categories for individuals and businesses and does cost money, but they also offer online preparation services. There is an entry level service for those who use the 1040EZ form or who have very simple returns to prepare and file. This level is free for those who qualify. Be careful if you check this out as they will naturally provide opportunities for you to upgrade — at a cost. Read descriptions in detail to be sure you need the extra service provided at an additional cost. Federal online filing is provided at no cost, though there is usually an extra charge if you also need to prepare and file state taxes.
Internal Revenue Service: The IRS provides a wealth of tax assistance — don’t be afraid to use it! It is in their best interest to provide excellent support and to make it easy for you to pay what you owe, even if you can’t pay it all right away. For one thing, they offer Free File Tax Software for those who have an Adjusted Gross Income (AGI) of less than $57,000 per year. The AGI is less than the total you earn, so check you last year’s return to estimate what your AGI might be to see if you qualify. This service applies only to your federal return.
Tax Counseling for the Elderly (TCE): This is a volunteer program that offers help to seniors 60 years of age or older. The volunteers are trained and certified through an exam provided by the IRS. They offer counseling and support in preparing tax returns throughout the country, typically at community centers, senior centers, libraries and other locations. Often these locations also include free online tax filing services as part of the support they provide. You can find out if there is a location near you by calling the toll-free number 1-800-829-1040. There is no eligibility requirement other than the age requirement of 60 years or older.
Free File is a service offered by a group of 14 commercial tax preparation companies also referred to as the Free File Alliance. It helps taxpayers who earn $60,000 per year or less. However although about 70% of U.S. filers should qualify for the program, only about 3% have taken advantage of it. That could be lack of knowledge but it could also be because of drawbacks in the program. Although the earned income amount is supposed to determine your eligibility for the program, individual companies participating (like H&R Block, Intuit's Turbo Tax etc.) can determine some additional requirements of their own. Some have modified the income amounts that will qualify and others have limitations based on the filer's age. Some will only do federal returns but not State — or they will only do your federal return if you also have state income taxes to file, and they charge you for the state return. It all gets rather confusing! You can find a screening tool on the IRS website to help you sort things out if you wish to try FreeFile.