The Internal Revenue Service and the Free File Alliance have reached a new five-year agreement to continue providing free tax preparation software for 70 percent of tax filers.
The deal also opens the door for innovations such as importing prior-year information and requests for extra options for free state tax returns. The agreement also provides greater transparency regarding any charges associated with state tax return preparation.
Free File, available at IRS.gov/FreeFile, provides taxpayers with free brand-name tax software or fillable form options. For 2015, anyone whose income was $60,000 or less is eligible for the free tax software. For people who made more than $60,000, the Free File Alliance provides Free File Fillable Forms, the electronic version of IRS paper forms. Free File also provides free tax extensions, with no income limitations.
“Free File offers considerable savings to those who need it the most and remains an important part of our expanding array of online resources for taxpayers," said IRS Commissioner John Koskinen in a statement. "All taxpayers can benefit from the partnership between the IRS and the Free File Alliance through either Free File software or Free File Fillable Forms."
The goal of negotiations between the IRS and the Alliance was to improve the taxpayer experience when using Free File. For example, companies will be encouraged to import prior-year tax return information to make tax preparation easier and import available information returns, such as Forms 1099.
As part of the agreement, the Alliance agreed that it would ensure free federal and free state returns from IRS.gov for the 21 states plus the District of Columbia that currently have their own partnerships with Alliance members. Alliance members would not be required to provide free state returns for all 50 states; however, some do so now.
There also will be more information on IRS.gov about the Free File states and which companies offer free state tax preparation. Companies that charge for state tax preparation also will clearly display their fees on their landing pages.
“Working with the IRS, the Free File Alliance has dutifully served American taxpayers for 13 years, providing over $1 billion in free tax software,” said Free File Alliance executive director Tim Hugo. “By making industry-leading tax software available at no cost, Free File has introduced millions of Americans, many of whom could not otherwise afford tax software, to the efficiency and ease of e-filing. The program has continually advanced the IRS’s e-filing initiative, while meeting a critical need, and we look forward to continuing this important service well into the future.”
Companies also can expand their Free File offers to active duty military personnel beyond the income cap set for other taxpayers. As part of the agreement, the IRS will not develop a direct file return program of its own.
The IRS and the Alliance currently are operating under a one-year extension. The new agreement will be effective Oct. 31, 2015, through Oct. 31, 2020.
The IRS and the Alliance first entered into a partnership in 2002 when the agency was seeking ways to expand electronic filing services to lower income taxpayers. Free File made its debut during the 2003 tax filing season. Since 2003, more than 43 million people have filed using free software products. Based on a $30 estimated fee, these taxpayers have saved an estimated $1.3 billion since Free File began.
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