It’s that time of the year. The airwaves are filled with March Madness basketball coverage and commercials about online tax preparation services. Many of those tax-related ads include the word “free.” Using the terms “free” and “taxes” in the same sentence is something only the IRS and Madison Avenue could dream up. The only universally “free” feature of online tax preparation software is an electronic filing service called FreeFile, provided through an agreement between the largest online tax services and the IRS. It enables all online tax services–and individuals–to use the same software to upload tax filings.
As for actual “free” services by online tax preparation services, they typically are available only for the slice of taxpayers who file a simple form, have no deductions (i.e., no mortgage or charitable gifts) and have all their information in a digital form that can be transferred to the online service.
As you’d expect, there is nothing free for small business owners beyond the free uploading of your tax form. For example, Turbo Tax the preparation fees for small business owners and the self-employed start at $104.99. (But we are somewhat confused how something can “Start for Free” and cost $104.99.)
Bottomline #1: If you have very simple tax preparation needs, you may be able to do the entire process in a “free” way online. However, most small business owners have nuanced issues regarding inventory or sources of revenue that should be handled in coordination with your trusted accounting and legal advisors.
Bottomline #2: If you haven’t started work on your filing, move it to the front burner immediately. The more time you give yourself and your preparer, the more likely you are to get things done in a less stressful, more accurate fashion.
Here are some facts from the IRS about the companies that provide “free” tax filing:
- Each online tax company sets its own eligibility criteria, generally based on income, age, state residency, eligibility for the Earned Income Tax Credit and military status.
- The free online tax services versions that are free are open to taxpayers who have incomes of $60,000 or less.
- Tip: Once at the company’s website, review their information to ensure it meets your needs. For example, some offer free state tax returns while charge a fee.
Next in our Tax Day Countdown Series: Tips for choosing a local tax preparer