Don't Mess With Taxes

Last year, some tax software companies allegedly hid their Free File option on their corporate websites, instead sending otherwise eligible free filers to paid products. That won't happen again, says the IRS, under a new Free File agreement that was just signed and takes effect for the upcoming 2020 tax-filing season.

The only thing people like more than getting their annual tax refunds is getting things for free. The IRS says that this coming tax-filing season, its new agreement with tax software companies will help ensure that eligible taxpayers will know that they can combine those loves via Free File. (Photo by Ken Hawkins via Flickr CC)

2020 hasn't yet arrived, but some folks are champing at the bit to file their 2019 tax returns. They are expecting tax refunds and want that tax cash as soon as possible.

The Internal Revenue Service is getting ready for that early-filing crush and hoping more people this coming filing season will take advantage of Free File.

And now, says the IRS, it has taken steps to ensure that eligible Free File users will be directed to that no-cost option instead, as reportedly happened last year, to some software companies' for-pay products.

Not-so-free filing for some in 2019: Free File is partnership between the federal tax agency and the tax software manufacturers represented by the Free File, Inc.

It usually opens for business the next-to-last or last week of January and, as its name indicates, offers eligible taxpayers a no-cost way to prepare their taxes online and file them electronically.

Last year, however, some filers who could have filed for free at the IRS site instead ended up paying.

A Pro Publica investigation found that some tax preparation firms, include the giants H&R Block and Intuit's Turbo Tax, allegedly blocked search engines' access to their Free File versions, instead directing filers to the companies' for-pay options.

That won't happen this year, says the IRS.

New Free File agreement in place: Today, the federal tax agency announced a new agreement with Free File, Inc. (FFI).

The revision, according to the IRS, is designed to bring more clarity for taxpayers choosing to use free online software during the 2020 filing season.

More importantly, the tax agency says this new agreement "will help make the Free File program more taxpayer-friendly while strengthening consumer protections in several key areas."

Among the features designed to make the program more taxpayer friendly for the 2020 filing season are agreements with the participating software companies that they:

• Will not exclude their Free File Landing page from an organic internet search.
• Will ensure a link on their sites is available to return taxpayers to the IRS Free File website at the earliest feasible point in the preparation process if they do not qualify for the Member's Free File offer, and
• Will regularly survey taxpayers who successfully e-filed a tax return through the Free File program, reporting their results quarterly to the IRS.

"This updated agreement is part of a larger effort by the IRS to help taxpayers meet their tax obligations," said IRS Commissioner Chuck Rettig in the IRS statement about the new Free File deal. "The improved process will make Free File stronger and give taxpayers another reason to consider this valuable software option."

Rettig said his agency and FFI also will work together "to identify and explore ways to better help low- to moderate-income taxpayers and to pursue meaningful opportunities to enhance taxpayer awareness and use of the Free File Program beyond the 2020 filing season."

Many still 'banking' refunds: American taxpayers have long loved their annual tax refunds.

Some thought that the Tax Cuts and Jobs Act (TCJA), would change that. Creators of the tax reform law touted its lower rates and wider income brackets as a way to put more money into taxpayers' hands.

Lots of folks, however, seem to still love those annual refunds more than incremental income increases they could get each payday by adjusting their withholding. They prefer letting the Bank of Uncle Sam hold onto their money until they file their taxes.

That trend is expected to be true in 2020, even after last year's confusion, misunderstandings and frustrations about how the TCJA affected payroll withholding and eventual refund, or no refund, amounts.

Free File 2020 early info: These taxpayers also have learned that they can withdraw their tax cash by filing their 1040 Forms (revised again for the coming tax season) early and electronically.

Some of them will be eligible for Free File next year.

For the upcoming 2020 tax-filing season, you can use Free File if your adjusted gross income is $69,000 or less. That's a nice bump up from the $66,000 earnings cap this most recent filing season.

In addition, some Free File providers will offer both free federal and free state tax preparation.

Active duty military personnel with incomes of $69,000 or less also may use a Free File software product of their choice without regard to other criteria.

And, notes the IRS, Free File Fillable Forms again will be offered for use by taxpayers who do not qualify for the main Free File option.

These fillable forms are versions of common IRS printed forms that can be completed online and then e-filed. Note, however, that the forms option does not offer any guidance that you'd find with a tax software program.

Finally, and this is a key factor for folks anxious to get their tax refunds, you need to be a bit more patient. Free File won't open for a few weeks into January.

But it could be worth the wait to complete your return and file it for free.

Keep checking back here at the ol' blog. I'll let you know more about Free File for the 2020 filing season when it's officially available.

You also might find these items of interest:

• 5 tax tips for Free File users
• 9 ways the IRS reform bill will help taxpayers
• Several states investigating TurboTax marketing methods

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