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How to do your taxes for free — this map shows where taxpayers are using Free File

Taxpayers in Nevada, California, and Hawaii increased their use of the program by more than 66%.

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The IRS began accepting 2020 tax returns February 12. But before you start preparing your return, there's one question you should ask yourself: Did you make $72,000 or less last year? If you did, you may qualify to use the IRS Free File program to prepare and submit your federal return at no charge.

One of tax season's biggest missed opportunities, Free File pairs taxpayers with free software from major tax prep providers. It's is a public-private partnership between the IRS and private tax preparation companies who are part of the nonprofit Free File Alliance. Although Free File is designed so that 70% of taxpayers — about 100 million people — qualify to use it, historically, very few have.

But word is beginning to spread. Last year, more than 4.2 million returns were submitted using the Free File tool, according to the IRS — an increase of almost 50%. In some states, like Nevada, California, and Hawaii, the program's use was up by more 66%.

Taxpayers can use the IRS tool to determine Free File eligibility. The offers you get from partner companies will likely vary based on your income, as well as factors including your age and state of residence. Eligibility also tends to focus on people with straightforward returns, meaning they have W-2 income, limited investment income, and are claiming the standard deduction.

While Free File focuses on your federal return, the software may also set you up with low-cost (or even no cost) ways to submit your state returns. That may be especially important to consider this year. If you crossed state lines for extended periods in 2020, you'll likely have to submit tax returns for each of those places.

If you don't qualify for Free File, there are other options you might explore for free tax prep, including volunteer assistance programs and free versions of tax prep software.

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3 reasons to file sooner rather than later this year

In January, the IRS delayed the start of tax season by about two weeks "to do additional programming and testing" following the second stimulus package that Congress passed at the end of December. That means you'll have a shorter window to file your taxes, as the Treasury Department is unlikely to extend the traditional April 15 deadline as it did last year.

Here are three reasons you should file sooner rather than later during this year's truncated tax season:

  • The earlier you file, the sooner you get your money. A lot may have changed from last year to this one, but this axiom still holds true: "The sooner you file, the sooner you'll be eligible to receive your refund," Jeffrey Levine, chief planning officer at Buckingham Wealth Partners in Garden City, New York, told Grow recently. "That's money in your pocket sooner rather than later."
  • Claim your missing stimulus money. Your refund might not be the only money you're claiming from the IRS this year: Your 2020 tax return is the place to address any Covid stimulus payments you didn't receive, whether that's because your prepaid debit card was sent to an old address, or you simply didn't qualify for the full stimulus amount.
  • Keep yourself out of the backlog. When the pandemic sent much of the federal workforce home, it sent with it myriad delays for agencies who have to interact with the public. In the case of the IRS, that meant massive backlogs in its processing of mail and paper filings, some of which the agency is still digging out from under. By late January, the IRS still had a backlog of 6.7 million 1040 tax return forms to process, Politico reported. By filing early and electronically, you'll keep your records (and your refund) out of that mess.

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