And if you’re interested, here’s an updated post about filing for free in 2009.
If your adjusted gross income is under $54,000, there are several ways you can file your federal taxes for free. We would have used the Turbo Tax version, if I hadn’t won a free copy of Tax Cut.
Our income for last year is less than half that, partially because I wasn’t supporting myself until July and not fully employed until August. And partially because it’s just big anyway. It’s particularly useful for college students or teenagers, who are almost definitely within the limits. Honestly, I didn’t know about it last April or I would have used it then. My little sister used it this year and said it worked very well for her.
Why does Turbo Tax give it away? Two reasons jump out at me.
First, they hope you’ll become a paying customer when your income goes up. It makes sense. You become used to the system, you like the way it works, you trust them. And there are worse things to do…you’ll have to file your taxes somehow when you’re rich and famous.
Second, you can pay them to file your state taxes as well. That might be worthwhile, since computer filing is apparently less likely to trigger an audit (though I’m not sure about the state level). They’ve already got the data and you’re all happy about the size of your federal refund, so you just go with it.
I think it makes sense for them, and it makes sense for us to take advantage of it, albeit with eyes wide open.
How do you know if you qualify? The Money Magazine/CNN adjusted gross income calculator can help you figure it out.
And if you don’t want to use Turbo Tax for some reason, you can also use the Free File page on the IRS website to find other companies which offer the service.
Speaking of tax time, you still have until April 14th to put money in an IRA or Roth IRA and still have it counted for 2007 (you’ll have to tell them, though). We started ours at ING, because they offered lower minimums and decent options.
Disclaimer: While I got the link from Commission Junction, I don’t get a big commission (if any) if someone uses it. I picked it because I trust Turbo Tax.
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I used H&R Block’s free filing software this year for my federal taxes. I opted to do my own state taxes, though, because A) I don’t want to pay $30 to file my state taxes and B) I’d have to pay more if I used the same software I used for federal taxes. The program missed two deductions (or credits) that ended up costing me about another $100 in taxes. I must say, I do like the free e-File though.
I’ll say as someone who has used TurboTax for years that you can’t go wrong with TurboTax. It’s easy to use and makes rolling over data from the previous year a breeze – I love the online version. It’s a little pricey if you need to do multiple states, etc. – but worth every penny compared to going to an accountant or spending hours scribbling it out by hand!
– Steve
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