TurboTax is ending participation is a free electronic filing. – La Rusa Tax
Income taxes

TurboTax is ending participation is a free electronic filing.

Say goodbye to free tax return preparation using TurboTax. If you used this popular tax software to prepare and submit your taxes to the IRS, you will have to find another option in 2022. TurboTax is leaving the Free File program next filing season. If you requested extra time to file and now have until October 15, 2021, there is no need to worry, TurboTax will honor its commitment and you will be able to file your taxes free of charge for the calendar year 2020. 

Unfortunately, our government does not provide free tax preparation software, this is due to lobbying efforts of major software companies, who want to have you on the hook, so you pay them to prepare and file your taxes. Sounds ridiculous, but it’s true. Major software companies negotiated with our government there to provide free tax return preparation to some consumers, in exchange for the IRS agreeing to not develop its own software. That agreement is called Free File Alliance.

However, things are not so rosy at Free File Alliance. Last year H&R Block left the program, and now the second-largest provider TurboTax is dashing. This move came after ProPublica’s investigation revealed that various tax software companies had used deceptive computer code to hide the links to their free file option from search engines, instead of sending users to ostensibly free options at their company websites. Once there, however, taxpayers were offered add-ons that cost.

The regulator in total identified five companies that had participated in “unfair and abusive tax practices.” They are TurboTax, H&R Block, TaxSlayer, TaxHawk, and Drake Enterprises.  

“With the Free File program surpassing its founding goals of e-file and free tax preparation, and due to the limitations of the Free File program and conflicting demands from those outside the program, we are not able to continue in the program and deliver all of the benefits that can help consumers make more money, save more, and invest for the future,” posted TurboTax on its website. You can choose to believe what the company says or realize the truth: TurboTax’s goal is to generate income, not to run a charitable organization that provides free e-file. 

Unfortunately, these questionable practices have a direct effect on real people.  According to the Treasury Inspector General, “more than 14 million taxpayers met the Free File program criteria and may have paid a fee to e-file their federal tax return in the 2019 Filing Season.”

We certainly hope that TurboTax’s decision will once again re-energize lawmakers who for years have pushed for the IRS to do away with the for-profit tax software middlemen and essentially handle Free File on its own. Many countries use pre-fill tax returns that are sent to taxpayers for review and approval. However, such a system is almost impossible in the United States due to the complexities of our tax system. 

What program should be used instead of TurboTax? 

You can find all options by using IRS Free File Online Lookup Tool directly on the IRS website.  We tested this option ourselves and identified the following programs, that we liked the best:

  • TaxAct Free File Edition 
  • FreeTaxUSA
  • 1040NOW

Keep in mind, however, that now all free programs offer free state preparation and filing, the majority will only offer free federal tax return preparation. 

Be careful when using a search engine to look for free tax preparation programs. Make sure to avoid all paid advertising. 

Should you use Сredit Carma software? Is Сredit Carma really free?

It works great for not so difficult situations. If you have a job that issues you a form W2, dependents, and a mortgage, we most definitely recommend them. However, there are many limitations. Should you run into some problems and want to ask a specific question about qualifying for a deduction or you want to hand off all your documents to an expert to prepare your return, that option is not available. 

Should you hire a tax pro to get your taxes done instead?

If you choose to do so, make sure to always hire a licensed expert, who is EA or CPA. You can perform a license search on the IRS website. Professional tax preparers are paid to keep up with the tax code and their expertise can help ensure that you get all the deductions and credits you are eligible to receive.  Many times we find deductions that are missed by taxpayers, simply because software is not perfect, or you didn’t understand what it is you are being asked. 

In addition, the Internal Revenue Service reports that it takes nearly 20 hours to complete the average tax return with deductions. Do you really want to spend all weekend preparing your tax return, if you can just hand it off to the professional and rest easy?  

Small business owners tell us that they prefer to focus on their business instead of spending countless hours researching tax codes, just to find out at the end that they don’t understand how it might apply to their specific situation. 

Where can you find a trusted tax pro?

In addition to asking your family and friends for recommendations, you can most definitely search various local listings. Always make sure to read reviews and check the preparer’s license.