There are many ways to file your annual income tax return -- more than ever this year, in fact. But virtually all of them have a cost or catch. The best way for you to file is going to depend on your income, the complexity of your situation and how good you are at following directions. Your options:
IRS Free File
If you earn less than $56,000 annually, the Internal Revenue Service offers a free electronic filing service through the Free File Alliance -- a cooperative of roughly two dozen tax software firms including H&R Block, TurboTax maker Intuit Inc. and TaxSlayer.com. To participate, go to the IRS website at www.irs.gov and click on "Free File." The prompt will ask whether you want to pick a provider on your own or have the IRS help you. There are roughly 19 offerings, but not all are available to everyone. Some of the Free File partners also restrict their services by age, state or income. The "Help" prompt takes you to a brief questionnaire that narrows the field to companies that will accept your return.
The one caution: The service provides free federal filing, but most people will also need to file a state income tax return. Most of the free-file companies will charge $20 to $30 to file your state return. You save time by buying state tax filing from the company that you did your federal return because the programs typically import your federal information into the state return. But you might want to ask about the cost before you start. Many states including California offer free electronic filing, so you do have other options.
More free services
TurboTax and H&R Block offer free filing services that are separate from the income-restricted IRS program. However, the services are limited to those with simple returns -- those with wages, not self-employment or partnership income or complex investments, for example. And, like the program run through the IRS, this one will import your state tax information and file state returns, but not free. State filing costs $25 to $30.
In addition, for the first time, the IRS is offering an electronic filing option for higher-end taxpayers. This doesn't give you free software, but it gives access to free online tax forms, which you can fill out electronically and have the computer do the math. To get to it, click "Free File," but scroll past the prompts asking whether you want to pick a provider on your own or have the IRS help you, and click on "Choose Fillable Forms."
