Impatient taxpayers can finally stop twiddling their thumbs. Tax-filing season 2013 has officially begun.
It was delayed for almost two weeks while the Internal Revenue Service updated its systems to conform to law changes that were approved earlier this year as part of the so-called fiscal cliff bill -- the American Taxpayer Relief Act.
Most forms, especially for folks with more basic tax needs, now are updated. The IRS computer system is ready to roll, and the tax agency is finally accepting tax returns, whether filed on paper forms or electronically.
It is e-filers who are the happiest taxpayers right now. The number of electronic filers increases every year, primarily because they can get their refunds more quickly.
And today, those refund-producing electronic returns are running though IRS processing centers. They are arriving from tax pros and from taxpayers who directly file them, as well as via the 2013 version of Free File, which also opens for business on Jan. 30.
Free File 2013 basics
- You can file your 2012 tax return through Free File if your adjusted gross income is $57,000 or less.
- The income cutoff applies regardless of your filing status.
- Free File is for individual, not business, tax returns. However, a sole proprietor who files Schedule C with Form 1040 can use Free File.
- Some participating Free File vendors also offer free state tax return preparation and e-file.
- Some Free File companies offer free electronic extensions. But remember, you still must pay any due taxes by the April 15 deadline, or you'll be charged interest and possibly penalties on any tax you owe.
- You do not download anything. All of the software, which is encrypted to protect privacy, remains at the Free File company website you select, and your return is filed from there.
- Access Free File by going to IRS.gov and clicking on the Free File icon. Beware of offers by outside websites to take you to the Free File website, as they could be scams operated by identity thieves.
The Free File program is a partnership between the IRS and the Free File Alliance, a group of tax preparation software manufacturers. Some 20 software companies have participated in the online filing program in recent years.
Free File was created in 2003 as a way to get more people to e-file. Its target is taxpayers who might otherwise not e-file because they don't want to or can't afford to pay the cost of the computer filing programs or professional tax help.
The key qualification for Free File services is income. This year, taxpayers with adjusted gross income of $57,000 or less, regardless of filing status, can use the online program. This is the same income threshold as last year.
Participating tax software companies can establish other eligibility requirements. Some may limit usage of their programs based on geographic location, military service or other criteria.
To determine which software best fits your filing needs, the Free File website includes an online search tool to help you select one of the participating Free File companies.
Free File contributions to e-filing
When all 2012 tax data are tallied, online tax filing by individuals is expected to reach at least 81 percent, according to the latest report to Congress from the IRS Oversight Board.
The Oversight Board, created as part of the IRS Restructuring and Reform Act of 1998, noted that it is "generally satisfied with the overall steady progress being made in the percent of major tax returns filed electronically, which grew more than four percentage points between 2011 and 2012."
Three million of those returns e-filed last year came through Free File, says Tim Hugo, executive director of the Clifton, Va.-based Free File Alliance.
Some have criticized the program for not bringing in more e-filers. Last year's Free File contribution was just a fraction of the more than 119 million returns e-filed by individual taxpayers.
But Hugo says the program's success shouldn't be measured solely by filing numbers.
"We get people in the door for e-filing, people who've never e-filed before," says Hugo. "They may go to a commercial product later on, but they will continue to e-file. We are very pleased with that."
Working with VITA
Free File also is continuing its work with the federal Volunteer Income Tax Assistance program, popularly known as VITA.
VITA tax-filing clinics are set up each year in public places -- from libraries to community centers to shopping malls. Its volunteers provide free filing assistance to low- and moderate-income taxpayers who might not be able to afford tax software or professional filing help. This filing season, the services of IRS-certified VITA volunteers are available to people who make $51,000 or less.
Hugo says Free File is again placing kiosks, similar to self-checkout stations in retail stores, at VITA sites nationwide.
"You can do your return there or partially do your return and, if you need help, ask a VITA volunteer," says Hugo. "This helps some of those who are most in need of tax help."
The IRS has an online search tool to help taxpayers locate a nearby VITA site. Taxpayers also can call (800) 906-9887 for VITA locations.
Free fillable forms remain
The IRS says that Free File is available to 70 percent of taxpayers. But if you are among the 30 percent making too much money to use the service, you still can file for free using the tax agency's fillable federal return form option.
Here, online versions of the most commonly used IRS tax forms are available through the Free File page. You fill them out on your computer and then e-file the documents at no charge.
Just don't mistake the forms for tax software.
The fillable forms offer only basic calculations of what's entered on the form. And you must figure out what goes on the form without the online prompting found in software.
Also, the information is not automatically transferred to associated forms. That means you must, for example, manually enter your itemized deductions total from Schedule A to the appropriate line on Form 1040.
Still, taxpayers with relatively simple filing needs who don't want to buy tax software might find fillable forms a welcome alternative.
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