Find Free Tax Services Online

Procrastinator's guide to the IRS's and other sites.

Mike Hogan, special to PCWorld.com

Tick, tock: if the tax deadline clock is ticking for you, you're not alone. About one in five taxpayers (including me) wait until the last minute to file every year.

Not surprisingly, most of the late birds owe taxes, says the Internal Revenue Service, and most of those payments arrive after the April 15 deadline. So Uncle Sam has gone digital to nudge us along: an IRS Web site provides electronic filing in cooperation with 17 FreeFile Alliance companies that let some of us prepare and electronically file our federal taxes free of charge (except for the taxes themselves, of course).

Leading commercial tax preparation software packages offer the option of filing electronically--for a fee, in addition to what you've already paid for the software. Most of the vendors also offer online versions of their packaged products, although they usually charge for their use and for filing.

A few PC World readers have already tried the IRS-sponsored free or cheap services and report they like them.

But the IRS Web site can be confusing, and the 17 firms that offer free e-filing on behalf of the IRS use several different sets of criteria to qualify taxpayers for the service. Their instructions read an awful lot like the typical tax form; you could waste precious time deciphering them or working on the return before discovering whether you qualify for services from a given vendor.

Here's some background on the IRS site and on the different services intended to help you make better choices and save some time.

Prepare to Prepare

Preparation is part of the battle: Gather the necessary personal information. For details, you could read the 2800-word treatise under the Before Getting Started or the 1100-word treatise under the Steps to Getting Started and Key Definitions resources on the IRS site.

But basically, this is what they tell you: Have handy the ages of your spouse and yourself, your state of residency, and your military status. If you think you might qualify for an Earned Income Credit (EIC) or the 1040EZ form, you may need to explore those IRS links. But most people can get through the application process without knowing that, and don't even bother with those links if your 2002 adjusted gross income (AGI) exceeds $50,000.

That brings us to the most puzzling qualification of all: How can you know what your 2002 AGI is before you fill out your return? You can't.

But if you're a wage earner, it's probably very close to your income--wages, interest, dividends, and capital gains. If you're in business for yourself, changed jobs, or have rentals, you need to make an educated guess. Check the AGI from your 2001 return. Then, adjust the figure by the percentage you think your income grew or fell in 2002.

Click-Through Choices

Equipped with that information, you are ready to enter the IRS site. Click the Start Now button in the middle of the screen, which just responds by presenting two more buttons.

Ignore the Browse All Services button, since it just takes you to a page that duplicates the list of participating FreeFile companies you can already see arrayed below the two buttons. Each listing includes a one-sentence description of the principal qualification for free e-filing with that provider.

The Guide Me To a Service! button takes you to a very brief online questionnaire. You can complete this form to activate a wizard that will retrieve a short list of only the services for which you may qualify.

Most of the free-filing providers impose an AGI test to qualify taxpayers for their service: You must earn less than certain amounts that range widely. The limit is $9200 in the case of TaxEngine and goes all the way up to $40,000 for ezTaxReturn.com. Most of the qualifying amounts are clustered around the $27,355 median AGI of all American taxpayers.

The half of all Americans earning less than the median pay little or no taxes and overwhelmingly qualify for the single-page 1040EZ, or even the EIC form. You might assume their returns are so simple that few would need tax-paying services at all. But TurboTax provider Intuit reports preparing more than 1 million returns for free for that group last year.

Finding Where You Fit

Besides imposing means tests (your income falls below certain levels), some sites qualify you for free or cheap filing in other ways:

-- TaxACT.com offers services to those earning more than $50,000 OR using the 1040EZ form. That's an odd combination since, to qualify for 1040EZ, you have to make less than $50,000.

-- TaxBrain Online Tax Center offers free preparation and e-filing for Americans 50 and older.

-- Online Taxes originally focused on serving those age 20 or under, which is not a large group of taxpayers. Nevertheless, Online Taxes suspended that offer and disabled its IRS link on April 1. It now charges $15 per return (or $10, if you retrieve a coupon code from the IRS site).

-- eSmartTax.com specializes in tax preparation services for residents of Illinois, North Carolina, Ohio, Georgia, and California.

-- FileYourTaxes.com serves only residents of Arizona, Georgia, Michigan, or Wisconsin.

-- Taxslayer.com provides free federal and state tax preparation and e-filing for active-duty military. Even if you aren't serving right now, Taxslayer.com charges only $10 for both federal and state preparation and e-filing.

Click on the name of any of these sites to get a slightly expanded explanation of the service offered. Whatever the criteria, there's no guarantee you'll qualify for the free offers once you complete your return.

Don't Forget the State

But even if you qualify for free filing to the feds, you may still have to pay to prepare and file your state return. On some sites, filing state tax returns costs more than for federal; others charge less or provide it free.

You may also be charged for little-used schedules, special printing services, or customer service. If you pay your taxes by credit card, as opposed to authorizing a checking account debit, you also may be in for charges from your credit card company.

Also, not every site will have a full complement of tax forms available, or even carry some of the very common ones beyond the 1040, so browse before starting.

Finally, it could be tough to reach some of these sites in the waning days before April 15. Remember, many of us last-minute filers are firing up our browsers for help.