Filing taxes will be more expensive this year as the industry raises prices to combat the growing shortage of accountants.
According to the U.S. Bureau of Labor Statistics, tax preparation and accounting expenses increased 8.3% in November 2023 over the previous year. Taxpayers typically spend an average of $140 annually on tax returns, the IRS estimates.
But if your return is relatively easy, there are several free filing options to consider this season, experts say.
1. IRS Free File
IRS Free File is a public-private partnership between the IRS and Free File Alliance, a nonprofit organization made up of tax software companies. It offers free guided tax preparation software for eligible filers.
The “biggest change” this season is a higher adjusted gross income limit, which now stands at $79,000 for 2023 filings, up from $73,000 last season, according to Tim Hugo, executive director of the Free File Alliance.
Adjusted gross income is your total income minus “adjustments,” such as certain pre-tax contributions to the individual retirement account and student loan interest. Pretax 401(k) contributions also reduce the income reported on your W-2.
If you’re comfortable with tax software, Free File has eight partners this season, with different income criteria – and some offer free linked state filings. This tool will help you find the best option.
“Free File isn’t just for simple returns,” Hugo said, pointing out the program’s required forms and schedules, such as Schedule B for interest and dividends or Schedule C for self-employment, contract or gig economy work.
About 70% of taxpayers qualify for free filing, but only 2% took advantage of it during the 2022 filing season, according to the National Taxpayer Advocate.
“It is a product that we are very proud of,” says Hugo. “We wish more people knew about it.”
2. Free fillable forms
If your adjusted gross income was more than $79,000 in 2023, Free File also offers fillable forms for each income level, the electronic version of a paper return. About 460,000 taxpayers used fillable forms through Nov. 3 last season, according to the Free File Alliance.
It can be a good option if you are comfortable filling out the necessary forms and schedules without step-by-step guidance, according to the program. But you can only use fillable forms for the current tax year and there is no support for state returns. The system will automatically delete your account after October 20 and you will lose access to your file.
If you use fillable forms, you should keep a copy of your return for your records and in case of a future audit.
3. Voluntary IRS Tax Preparation Programs
If you’re looking for more guidance, you may also qualify for free tax preparation from IRS programs with trained volunteers.
The Volunteer Income Tax Assistance, or VITA, program offers free tax preparation for taxpayers typically earning up to $64,000, in addition to filers with disabilities and limited English proficiency.
Tax Advice for the Elderly, or TCE, is intended for filers age 60 or older, with a focus on retirement and pension questions. AARP Foundation Tax-Aide also offers free tax preparation for older adults with low to moderate incomes. You can see what this program entails here.
Although both IRS programs include a range of forms and schedules, there are limitations here. This tool allows you to find a location near you.
4. IRS Direct File
Select taxpayers may also qualify for the limited Direct File pilot this season, which allows free filing through the IRS.
Although the program will begin by invitation only, the agency expects to roll out the service to select taxpayers in 12 states by mid-March. Eligible states include Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming.
“It’s really aimed at people with very simple tax matters,” said Steven Hamilton, an assistant professor of economics at George Washington University.
This season, Direct File will only accept Form W-2 wages, Social Security retirement income, unemployment benefits, and interest of $1,500 or less. You must claim the standard deduction, and the system only accepts a handful of credits and other tax breaks.
5. Private companies
Certain taxpayers can also find free filing options from private companies. But “if you work with a tax preparation company, you should expect additional costs for additional services,” says Ed Mierzwinski, consumer attorney at the US Public Interest Research Group. “That’s the business model.”
The Federal Trade Commission in January upheld a September ruling that found there was an economic crisis Intuitive, maker of tax preparation software TurboTax, violated federal law by marketing free software to ineligible filers and upgraded to luxury and premium products. Intuit has appealed the “deeply flawed decision,” a spokesperson said.