There's been one positive for the Internal Revenue Service this coronavirus-affected tax filing season. The agency says that Free File has hit a record percentage increase in new users.
And there's still just more than a week before the partnership between the IRS and tax software manufacturers shuts down on Oct. 16.
Free, but previously not that popular: The online tax preparation and e-filing products that, as the Free File moniker indicates, allows eligible filers to complete and electronically transmit their tax returns at no cost, has been available since 2003.
However, despite the growing popularity of do-it-yourself tax filing products and the $0 price tag for Free File, the IRS-offered option has not caught on like its commercial counterparts.
Big bump: This filing season, IRS Free File online products marked a 50 percent increase over last year.
So far, more than 4.1 million taxpayers used one of the free online tax software products offered this year by 10 participating IRS partners, including a couple offering software in Spanish. Last year, more than 2.7 million taxpayers used Free File.
"The IRS has worked with our partners to make important improvements to the Free File program this year, and we are encouraged by the strong increase in usage," said IRS Commissioner Chuck Rettig in an announcement of the 2020 Free File success.
Software company search changes: One of those improvements was a revision to the agreement between the IRS and Free File Inc., the coalition of tax software companies that work with the IRS to provide free electronic tax services.
Investigative journalists at Pro Publica discovered some major tax software companies manipulated online searches to keep eligible taxpayers away from using the IRS-based no-cost. Instead, they inserted code that directed taxpayers to the software's no-cost products instead of the Free File site at IRS.gov.
After much public, consumer advocate and Congressional uproar, the companies agreed to new rules banning them from hiding their IRS-based Free File offerings from online searches.
More COVID-caused filings: While that search engine change could have contributed to the increased Free File usage this year, the coronavirus pandemic likely helped, too.
Overall, through July 24, the IRS had received almost 144 million e-filed tax returns. That's a 9.7 percent increase over the slightly more than 131 million electronically transmitted 1040 forms in 2019.
The hike was even greater for e-filings that were done by taxpayers themselves. This self-prepared category went from 56.7 million in late July 2019 to 69.8 million this year, a 23 percent increase.
Those notable increases include returns filed by individuals who usually aren't required to file taxes, but did so this year so they could collect COVID-19 Economic Impact Payments (EIPs).
The IRS says 96 percent of those who had no filing requirement and who registered for an EIP used an online tool, the Non-Filers: Enter Payment Info Here web page, that was supported by Free File participating tax software companies. That option will be available for non-filers to use through Nov. 21.
Free File for extended filers: If you've yet to file your 2019 tax return, Free File is still open and will be through that Oct. 15 deadline.
This year, the free tax prep and e-filing option is available to taxpayers whose adjusted gross income was $69,000 or less, regardless of filing status.
To use Free File, head to IRS.gov/FreeFile. Once there, select Choose an IRS Free File Offer. This will let you browse the options or use the lookup tool to find the Free File program that fits your filing needs. Links will lead you to your selected provider's product.
If your income is too high for Free File products, you still have a no-cost option. You can use Free File Fillable Forms, the electronic version of IRS paper forms.
You also might find these items of interest:
- 5 tax tips for Free File users
- Where to find your perfect tax preparer
- 9 ways the IRS reform bill will help taxpayers
|Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.
But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.