Here’s how to pick the best free tax filing option this season

Filing taxes is more expensive this year as the industry raises prices to combat a growing accountant shortage.

The cost of tax preparation and accounting fees grew 8.3% in November 2023 compared to the previous year, according to the U.S. Bureau of Labor Statistics. Taxpayers typically spend an average of $140 to file taxes every year, the IRS estimates.

But if your return is relatively simple, there are several free filing options to consider this season, experts say.

A public-private partnership between the IRS and Free File Alliance, a nonprofit comprised of tax software companies, IRS Free File offers free guided tax prep software for eligible filers.

The “biggest change” this season is a higher adjusted gross income limit, which is now $79,000 for 2023 filings, up from $73,000 last season, according to Tim Hugo, executive director of the Free File Alliance.

Adjusted gross income is your total income minus “adjustments,” such as certain pretax individual retirement account contributions and student loan interest. Pretax 401(k) contributions also reduce the income reported on your W-2.

If you’re comfortable with tax software, Free File has eight partners this season, with varying income eligibility — and some offer free linked state filings. You can find the best option with this tool.

“Free File is not just for simple returns,” Hugo said, pointing to the program’s required forms and schedules, such as Schedule B for interest and dividends or Schedule C for self-employment, contract or gig economy work.

Roughly 70% of taxpayers qualify for Free File, but only 2% used it during the 2022 filing season, according to the National Taxpayer Advocate.

“It’s a product that we’re very proud of,” Hugo said. “We just wish more people knew about it.”

If your adjusted gross income was higher than $79,000 in 2023, Free File also offers Fillable Forms for any income level, which is the electronic version of a paper return. Roughly 460,000 taxpayers used Fillable Forms through Nov. 3 last season, according to the Free File Alliance.

It may be a good option if you’re comfortable completing the necessary forms and schedules without step-by-step guidance, according to the program. But you can only use Fillable Forms for the current tax year and there is no support for state filings. The system will automatically delete your account after Oct. 20, and you will lose access to your filing.

If you use Fillable Forms, you should save a copy of your return for your records, and in case of a future audit.

If you’re looking for more guidance, you may also qualify for free tax prep from IRS programs with trained volunteers.

The Volunteer Income Tax Assistance, or VITA, program offers free tax prep for taxpayers typically making up to $64,000, in addition to filers with disabilities and limited English proficiency.

Tax Counseling for the Elderly, or TCE, is for filers age 60 or older, with a focus on pension and retirement questions. AARP Foundation Tax-Aide also offers free tax prep for low- to moderate-income older adults. You can see what this program covers here.

While both IRS programs include a range of forms and schedules, there are limitations outlined here. You can use this tool to find a location near you.

Certain taxpayers may also qualify for the limited Direct File pilot this season, which offers free filing via the IRS. 

While the program starts as invitation only, the agency expects to roll out the service to certain taxpayers in 12 states by mid-March. Eligible states will include Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming.

“It’s basically for people with very simple tax affairs,” said Steven Hamilton, assistant professor of economics at The George Washington University.

This season, Direct File will only accept Form W-2 wages, Social Security retirement income, unemployment earnings and interest of $1,500 or less. You must claim the standard deduction, and the system only accepts a handful of credits and other tax breaks.

Certain taxpayers may also find free filing options from private companies. But “if you go with a tax prep company, watch for and expect add-on fees for additional services” said Ed Mierzwinski, consumer advocate at U.S. Public Interest Research Group. “That’s the business model.”

The Federal Trade Commission in January upheld a September ruling that found Intuit, maker of tax filing software TurboTax, violated federal law by marketing free software to filers who were not eligible, and were upgraded to deluxe and premium products. Intuit has appealed the “deeply flawed decision,” according to a spokesperson.