Free tax prep?

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(USA centric post) The other day on the news I heard a story about free tax prep for those who earn under $69,000. Sounds great right? Well…but… w
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Susan Bradley Patch Lady/Prudent patcher

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SueW, HiFlyer, Pepsiboy, Elly, Bluetrix, CADesertRat, EstherD, woody

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It’s worse than you think. Read this article from ProPublica…

Inside TurboTax’s 20-Year Fight to Stop Americans From Filing Their Taxes for Free

Using lobbying, the revolving door and “dark pattern” customer tricks, Intuit fended off the government’s attempts to make tax filing free and easy, and created its multi-billion-dollar franchise

by Justin Elliott and Paul Kiel Oct. 17, 2019

 

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HiFlyer

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In an article by Geoffrey A. Fowler, Technology columnist on March 7, 2019, he reminds us what Susan has said here on AskWoody.

I know it’s hard to argue with free. But for too long, we’ve been letting free technology blind us to a really important question: How is somebody going to make money from this? In Silicon Valley, an adage goes, “If the product is free, that means you’re the product.”

The first sentence of his article made me want to read all of it.

Nothing is certain except death, taxes … and tech companies making grabs for your data.

He notes there are tax prep companies that offer free in hopes of up-selling, also the free for the right income level tax preparations, but the gist of his article is on a third type of free tax preparations offer. In this case he examples Credit Karma.

A third kind of free tax prep, offered by Credit Karma, is blazing a new path: paying with your privacy. Available since 2017, Credit Karma Tax is an extension of the credit score website that’s already used by 85 million people. The tax service is really free — even if you use complicated IRS forms. It makes money by showing you tailored “offers” for credit cards and loans based on a profile of your financial life, which includes your tax returns unless you adjust a setting to opt out.

Deeper in the article he says:

It uses perhaps the most intimate personal data outside of health records …  While credit bureaus and data brokers already collect information about your finances, some details are hard for that industry to come by, such as your cash flow, mortgage deduction and savings yield.

I don’t pay for my tax preparations, it is free … sorta. My sister is a CPA, but I get yelled at a lot during the process, like “what were you thinking?” Any paid service would just shrug, bite their collective lip and trudge ahead. Now that I think about it, I do pay. Oil changes, fixing stuff around her house, taking her kids to ball games (okay, I admit I enjoy doing that) and other things a big brother should do just because.

Even though the article is almost exactly a year old, the ideas presented are true today. Sometimes free means you pay a big price.

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SueW, Lars220, HiFlyer, Cybertooth, b

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Personally I use a “Free” tax filer listed on the IRS site but as mentioned by Susan, I end up paying for my State taxes at $9.95 which is worth it to me 🙂 I can get my taxes done and out of the way early every year.

Don't take yourself so seriously, no one else does 🙂
All W10 Pro at 22H2,(2 Desktops, 1 Laptop).

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Lars220, HiFlyer

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Low income folks were able to go to the local IRS office and file there at one time and that’s what I did in 2008 and the years before when not just using the regular mail for tax filing and the 1040EZ form.

The tax services have their profits to think about so up-selling/trickery is in full force no matter the income level so folks have to watch out for that and the pay day lenders as well.

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HiFlyer

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I have used “freetaxusa” for about 5 years now. For my income level it has always been free, and I am self-employed WITH  rental income as well! I have not noticed, or been alerted to, any unusual online or financial activities. I examine carefully my financial records every month.  My adult offspring has used “turbotax” for free for 2 years now with no anomalies. We are in Texas. So far, has been a VERY good, extremely convenient, money and time-saving experience for both of us.

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HiFlyer

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[TaskForce141]

In Turbotax Deluxe, I use the free e-file for the IRS, then lie to the program that I will file my state taxes by paper.  Instead, I go to California’s own online filing portal for state taxes.  Copy over a few numbers from the PDF copy of the state return and you’re done.   And without paying $20-$25 to Turbotax for the state e-file.

In fact, I could easily have just bought the lowest Turbotax tier (federal only, no state).  Copy over the numbers from the IRS 1040 into the state portal, and you’re done.

• This reply was modified 5 years ago by TaskForce141.

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Elly, HiFlyer

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An interesting article on the way it could be done and is done in other countries.

https://www.theatlantic.com/business/archive/2016/03/the-10-second-tax-return/475899/

cheers, Paul

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Susan Bradley wrote:

(USA centric post) The other day on the news I heard a story about free tax prep for those who earn under $69,000. Sounds great right? Well…but… w
[See the full post at: Free tax prep?]

Susan,

Great article. But when it comes to having to pay taxes, I’m one of the lucky ones. My taxable income is so low that I don’t even have to file with IRS or State. Yes, it does make keeping up with necessities a bit of a pain. We just have to plan way ahead for ANYTHING major.

Dave

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HiFlyer

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One prominent tax preparer claims that its’ online filing fees are: free, free, free.  Turns out that there is an income restriction that only approaches lower middle class or less.  These ads are on national TV.  I would think that they might be inviting a class action lawsuit.

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The worst thing about most of the “free” filing services is that you can’t obtain copies of your return(s) when you need them later… unless you pay for them, that is.

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jabeattyauditor wrote:

The worst thing about most of the “free” filing services is that you can’t obtain copies of your return(s) when you need them later… unless you pay for them, that is.

I get PDF copies of my taxes with the “Free” service I use (from the IRS site), although I do pay to have my State taxes filed through them and have copies of those also, but I would get the copies of my Fed. regardless.

Don't take yourself so seriously, no one else does 🙂
All W10 Pro at 22H2,(2 Desktops, 1 Laptop).

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jabeattyauditor

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Contact the IRS directly, instead. Transcripts of prior fillings are available on request. I do not have current information as to limits on requests or cost associated. when I need 3 consecutive fillings, quite some years ago now, it was provided promptly and free. Information, directions, and forms are likely available at the appropriate .gov site.

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In my other post I state I have used ‘freetaxusa’ for about 5 years. They have always had my data available any time, for free. When I start a new tax year filing all the data is applied to the new year with the option to change or update as needed – free. Even the amortization of my mortgage is figured – free. free.free.free… yes, it really is for my income level, free.

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UnitedWay used to offer the premium version of HR Block under their MyFreeTaxes program – but have completely neutered it this year to be the same as HR Block’s regular free version.

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Volunteer Income Tax Assistance Program

https://www.irs.gov/individuals/free-tax-return-preparation-for-you-by-volunteers

 

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For senior citizens 65 and over is the new 1040SR form.  You get a larger standard deduction then using the regular 1040 form.

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Geo wrote:

For senior citizens 65 and over is the new 1040SR form.  You get a larger standard deduction then using the regular 1040 form.

I don’t believe that’s the case – the SR just has a larger typeface and other points of simplification.

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wavy, b

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From the IRS eFile website:

Age: If you are age 65 or older, you may increase your standard deduction by $1,650 if you file Single or Head of Household. If you are Married Filing Jointly and you OR your spouse is 65 or older, you may increase your standard deduction by $1,300. If BOTH you and your spouse are 65 or older, you may increase your standard deduction by $2,600.

The standard deduction is larger for those over 65 years of age, just as it is for those legally blind.

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jabeattyauditor wrote:

I don’t believe that’s the case – the SR just has a larger typeface and other points of simplification.

I used the 1040SR form and since I am over 65 Filing single , my standard deduction was $13,850.00 instead of the $12,200 for under 65. The 1040SR form is a simplified 1040 form if you aren’t going to take a lot of deductions and use the standard deduction.

Don't take yourself so seriously, no one else does 🙂
All W10 Pro at 22H2,(2 Desktops, 1 Laptop).

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[jabeattyauditor]

The form used doesn’t determine your standard deduction. You can take your full (over 65) standard deduction using a standard 1040. (The form has only the usual standard deductions listed in the left margin, but the instructions specify that you can plug in the amount from the worksheet which includes the additional amount for being born after 1/2/1955.)

• This reply was modified 5 years ago by jabeattyauditor. Reason: spelling

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jabeattyauditor wrote:

The form used doesn’t determine your standard deduction.

That’s correct, you can use either form for Standard deduction, as I explained earlier though (in my case) the SR form worked well for me since I don’t have any write-offs etc. as it’s a simplified form. I had my refunds (Fed/State) back by mid Feb. The form you use just depends on your situation.

Don't take yourself so seriously, no one else does 🙂
All W10 Pro at 22H2,(2 Desktops, 1 Laptop).

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We’re on the same page.  🙂

The new SR form does remind me of the Extra Simplified 1040:

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CADesertRat

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I’m a 70 year old living in upstate NY on my social security, a small union pension, and my savings. For years I used TaxAct to file both federal and state online for free; but they stopped offering their services for free to those over 65 years of age about 3 or 4 years ago. Since then, I have been filing both federal and state online for free through TurboTax. Both vendors are great and generated no complaints from me at all. TaxAct even let you download their software for free (until they stopped). TurboTax has been great and also allows you to go back for copies of your returns for up to the end of the calendar year in which they were filed. The key to getting it free, the trick if you will, is you must first go to the IRS tax filing website and use the link they provide on their site to get to the TurboTax filing site. It won’t be free if you go directly to their website without using the link provided on the IRS website.

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SueW

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Sorry, but have a hard time sympathizing.  If you just have 1099-SSA, 1099-R for a pension, and some 1099-INT you could just do it by hand easily enough.  And get the 5-second return that article brags about.  Now if you have to do a Form 1116, or the AMT, or the new qualified business income you are talking real work.  And then for CA state return, you essentially have to do your Federal 1040 again, this time using CA rules which in many cases don’t conform to Federal.  Remember, “income” is just an accounting concept so coming up with a number for it is always going to take effort.

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I filed our taxes with Credit Karma this year, totally free, where other sites wanted me to “upgrade” to a priced tier due to some of the forms needed. No issues, already received both our refunds.

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Whoa… Susan!  I wholeheartedly agree with your thought that we normally get what we pay for.  However, I have not paid a penny for our tax preparation for the last number of years using IRS Free File as the launch for OLT (OnLine Taxes).  Filing 1040A, then 1040 and Illinois state returns in past years.

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The gotchas are just how they divided up the pie. They set it up where each company gets a different subset for free. They make it deliberately complicated to try and get more money out of you, but the result is that everyone is covered, one way or another.

State taxes are a separate thing, and not set up by the same setup. But it is one way they try to recoup costs. But you can always opt out of using their state taxes and fill them out separately elsewhere. Yes, this means you may have to fill out the same information multiple times, but it’s doable.

No, it shouldn’t be that way, but good luck getting a law passed that would put several large companies out of business. (See also why it’s hard to pass universal healthcare). Companies intentionally get big enough that it would harm the economy to take them out.

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Very belated reply, in case folks haven’t done their taxes yet (and the IRS has delayed the due date to July 15): check your state revenue department, not the IRS, for free online tax prep info. I know in SC that’s where the links are for both, as I’m pretty familiar with the site both from personally free filing both that way for years and from having to download and print out tax forms for library patrons. It’s also where you should check to see if your state has pushed back the due date for returns to match the Feds. You sadly do get the same restrictions listed up front, but hopefully one will work.

Also, if you make over the financial limit or otherwise don’t qualify, and you are willing to do your taxes by hand, you might be able to just do fillable forms on the IRS and state sites and e-submit that way. That does depend on how complex your taxes are, based on the caveats on the IRS and SC versions, as some forms/lines aren’t available. Otherwise, since right now it will be hard to find VITA and AARP sites (and while AARP says they give seniors precedence, both groups in my experience when they’ve helped people at libraries help everyone), you may have to bite the bullet and pay if you want to e-file.

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