If you’re counting on a tax refund to bankroll your summer vacation or top up your savings, you’re not alone: the tax system is set up so that most taxpayers are actually owed money by the IRS at the end of each year. In 2017, for example, the Internal Revenue Service sent $324 billion in tax refunds out, for an average refund of $2,895 per person.
But to get that money—which let’s be clear, is yours—you need to file your taxes, and that often means paying someone to help you do it.
“What a great system,” said no one who has ever filed their taxes.
Enter free tax filing programs. Filing online for free is a great fit for someone with a pretty simple tax situation, and you've got lots of options here, from the totally free Credit Karma software for both federal and state returns to the top-rated TurboTax (which only offers free federal returns). Many even have free phone apps, so you could literally do your taxes anywhere.
A simple return is typically one in which you claim less than $100,000 in taxable income, don't own a home or business, and are aren't itemizing deductions. Most people who earn less than $75,000 don't itemize, according to the Tax Foundation, and that percentage is expected to get even lower because of higher standard deductions that kick in next tax season.
If you got paid cash tips that aren't reported on your W-2 or earned freelance income reported on a 1099 form, your free options are more limited because you'll need to file the full 1040 tax form. Sure, you can print out the IRS forms directly from IRS.gov for free, but filling them out can get complicated. "The IRS is, of course, the last word on taxes, but creating lucid, reassuring guides is not one of its notable strengths," PC Mag noted.
Some free programs, like Credit Karma, let you do complex returns at no charge. But when you're trying to shave your tax bill and are juggling multiple pieces of paper from gig jobs, extras like expert advice and ability to save past returns, which are typically included in the paid software, are well worth the $100 or less you'll pay for them.
But if you want to go the free route—and who doesn't?—here are some tips:
Which program should I use?
The best known and best rated free tax programs come from TurboTax and H&R Block. Although both only offer free federal returns (and charge up to $40 for state returns), they have better user interfaces than some of the other free software, which takes the headache out of doing your taxes. "TurboTax’s easy-to-understand, step-by-step instructions are unparalleled, even on the mobile app. In fact, it’s just as easy to e-file a 1040EZ or 1040A from your smartphone or tablet (which 6 million people did last year, according to Intuit)," the Simple Dollar noted.
I liked TurboTax when I tried it because its friendly, clear interface doesn’t overwhelm you with tax questions. Instead, they walk you step-by-step through the process one question at a time, including a question about (this is not a joke) how you feel about filing your taxes.
The one thing that annoyed me about TurboTax is that it tries to upsell you on a paid version of the software by having you select statements that are true for your tax situation. If you’re rocking a more complex tax situation as a freelancer, or are the owner of a rental property, it’s quickly clear that the free version isn’t going to cut it based on their recommendations.
H&R Block's free program, on the on the other hand, has some nice features of its own like the ability to import returns from last year from competitors like TurboTax, TaxAct, and Credit Karma. And like TurboTax, you can just snap a photo of your W-2 instead of typing in the numbers.
To get started, you’ll select a few key statements about your tax situation, and be faced with a clear recommendation as to whether the free-filing option is right for you. Even if you do get the go-ahead to file for free, you’ll still be offered the upsell to have a professional review your return before you submit it.
Once you’re into the app, they walk you through each step in a way that feels easy and mostly jargon-free. Overall, it’s another friendly, easy-to-use option suitable for a total tax novice.
If you want other options, you could look at TaxAct.com, which offers free federal returns only; eSmart Tax, which offers free tech support via chat and and free audit support from a CPA; and TaxSlayer, which has free phone support and lets you file both state and federal returns for free—but only if you use the 1040EZ (meaning you have no dependents, makes less than $100,000 and aren't itemizing deductions, among other restrictions).
Then there's Credit Karma which stands out for offering free federal and state returns even if you file the long form (aka the 1040). The best thing about Credit Karma is that because there is no paid version, you'll never be pressured to upgrade to one. On the downside, it doesn't walk you through the process as smoothly as other programs. "There is a Help Center to assist with questions and offer some explanations. But there’s no detailed, step-by-step guidance that other services have," Smart Asset noted.
Of course, tax software isn't perfect, even if you choose a paid version. “Tax software isn't able to catch or prevent errors, and people using it incorrectly assume otherwise," Eric Nisall, tax accountant and creator of Bookkeeping for Bloggers, said. And being forced to send in an amended tax return because you fucked up the first time around is its own special hell. You'll also likely face penalties if you underpaid your taxes because of an error on your original return.
Is my data safe with free tax software?
Make no mistake: Companies that offer free tax software are doing it for a reason. Many, like TurboTax and TaxSlayer, offer it to get you to upgrade to their paid products as your tax situation inevitably gets more complex down the line.
Others do it for the data. While they don't generally sell it to third parties, CBS News reported, "some do use it for themselves, and sometimes their partners, to sell financial products like refinancing a mortgage, which they get a commission for."
Credit Karma, for instance, is in the business of providing leads to credit card companies. And once they have your income data from your tax returns, it's easy to to know which cards and loans you can get approved for. "The company says it encourages, but doesn't require, users of the free tax preparation to share their tax data so the company can match them with lenders," the Wall Street Journal reported.
H&R Block asks you to agree to this optional release when you use its free tax program:
I authorize H&R Block* to disclose to H&R Block Client Research and Support Services, LLC all my 2017 tax return info (excluding all Social Security Numbers and my dependents' personally identifiable information) and info regarding how long I have been an H&R Block customer to help us personalize your H&R Block experience.
You can get around this by clicking "No Thanks" at the bottom of the screen, but the request should give you pause. At a time when everyone from Facebook to Equifax is playing fast and loose with your data, it's wise to read all the fine print about how your personal data is being used so you fully understand the real price of "free" services.