Tax hacks 2018: 7 ways to get your taxes done for free

The countdown to the tax deadline has begun: This year, Tax Day is April 17. If you need help preparing state and federal tax forms, now is the time to get started.

Many Americans will pay someone to help them prepare and file a return. That is probably a worthwhile expense for some. But “free” is the best price for many others.

So, before you go out and throw down several hundred bucks, check out these gratis alternatives. Many national programs charge nothing to help taxpayers prepare and file their taxes. See whether your tax situation and income meet qualifications for these seven free programs:

1. Volunteer Income Tax Assistance

The free IRS-sponsored program VITA (Volunteer Income Tax Assistance) uses trained volunteers to help taxpayers complete basic state and federal tax returns.

Who’s eligible: Generally, taxpayers earning $54,000 a year or less, those with disabilities and people with limited English-language abilities, according to the IRS.

Resources:

  • Use this online locator tool to learn when and where to find free VITA tax preparation help (and help from the Tax Counseling for the Elderly program) and whether you’ll need an appointment or can walk in. Or call 800-906-9887. The IRS website has a list of what to take to your appointment.
  • “Self-prep” is an alternative. You prepare and file your own basic state and federal tax forms using web-based tax software and with help from an IRS-certified volunteer. The option is available at VITA locations that list “Self-Prep” in the site listing.
  • Want to volunteer to help low- and moderate-income families with their taxes? The IRS will train you. Find out more at the IRS website.

2. Tax Counseling for the Elderly

IRS-certified volunteers provide free tax preparation to older taxpayers through TCE (Tax Counseling for the Elderly). Many of the volunteers are retired people associated with nonprofit organizations that receive grants from the IRS.

The IRS says a majority of TCE sites are operated by the AARP Foundation’s Tax-Aide Program.

Who’s eligible: The IRS says the program “offers free tax help for all taxpayers, particularly those who are 60 years of age and older.” (AARP says it offers “individualized tax preparation for low-to moderate-income taxpayers — especially those 50 and older.”)

Resources:

3. IRS Free File

Free File is a partnership between the IRS and makers of commercial tax-preparation software participating in the IRS Free File program. Depending on your level of income, eligible taxpayers get free use of one of the following:

  • Free File, a secure, free-of-charge brand-name tax preparation software that includes help with state returns.
  • Free File fillable forms. State tax preparation is not included.

Who’s eligible: If your income is below $66,000, you qualify to use the Free File tax preparation software.

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If your income is above that mark, you are limited to using the free, fillable, electronic versions of paper forms. These forms will do your tax math for you, but you only receive basic guidance.

Rules vary among the tax software companies participating in Free File. The Press Enterprise, a news organization serving inland Southern California, urges you to “be aware that those providers offer upsells for a fee including state income tax preparation and insurance.”

Resources:

RELATED: Check out these five super simple ways to lower your taxes: 

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5 ridiculously simple ways to lower your taxes
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5 ridiculously simple ways to lower your taxes

1. Contribute more to a retirement account

If you put money into a traditional IRA or 401(k) plan, you'll benefit in two ways. First, you'll get the financial security that comes with having savings available in retirement, and the earlier in life you start contributing, the more opportunity you'll give your money to grow. But you'll also benefit from a tax perspective, because the amount you contribute will go in pre-tax. What this means is that if you make $50,000 a year but put $5,000 into your 401(k), you'll only pay taxes on $45,000 of income. Talk about a win-win!

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2. Donate items you no longer use

Is your basement or hall closet overflowing with clothing, tools, and gadgets you don't need? If you donate those items to a registered charity, you'll get to claim a deduction on your taxes. All you need to do is obtain an itemized receipt of what you give away to verify your donation, and you're all set.

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3. Open a flexible spending account

Medical care can be a huge expense for some families. Americans spent an estimated $416 billion on out-of-pocket medical expenses in 2014, and that number is expected to climb to $608 billion by 2019. But if you sign up for a healthcare flexible spending account (FSA), you'll get to pay for eligible medical expenses, like copays and prescription drugs, with pre-tax dollars. For 2016, you can allocate up to $2,550 to an FSA, which means that if your effective tax rate is 25%, you'll save $637 by contributing the maximum. But don't make the mistake of overfunding your FSA. The money you contribute goes in on a use-it-or-lose-it basis, so if you put in the full $2,550 but only rack up $2,000 in eligible expenses, you'll have to kiss that remaining $550 goodbye.

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4. Use pre-tax dollars to pay for child care

Childcare is one of the greatest expenses families with young children face. The average American household currently spends $10,192 a year on full-time day care center care, $7,700 a year on regular after-school babysitting, and $28,900 on a full-time nanny. The good news, however, is that you can shave a fair amount of money off your tax bill by opening a dependent care FSA. Similar to a healthcare FSA, a dependent care FSA allows you to allocate pre-tax dollars to pay for eligible child care expenses, which include preschool and summer camp. For 2016, a couple filing a joint tax return can contribute up to $5,000 a year in pre-tax dollars. If you max out that limit and your effective tax rate is 25%, you'll save $1,250 in taxes. The only catch is that like a healthcare FSA, if you end up spending less during the year on eligible expenses than what you put in, you'll forfeit your remaining balance.

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5. Sign up for commuter benefits

Traffic and rail delays can be a huge source of daily aggravation. But if your commute can't serve the purpose of helping you relax and ease in and out of your workday, it can at least help you lower your taxes. All you need to do is sign up for commuter benefits through your employer, and you'll get to use pre-tax dollars to pay for the costs you already incur. For 2016, you can allocate up to $255 per month in pre-tax dollars for transit and up to $255 a month for parking for a combined total of $510. If you hit that maximum and your effective tax rate is 25%, you'll save $1,530 a year on your taxes.

Nobody likes paying taxes, and there's certainly no reason to pay more than you have to. With a few smart moves, you can lower the amount you ultimately fork over to the IRS and keep more money in your pocket.

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4. Tax preparation companies’ free services

Several commercial tax-preparation companies offer free, basic online versions of their software. The major benefit with any free tax service is in the money you save. However, these services have limitations, which vary by product:

  • Some don’t offer free help with state returns.
  • Free products are for simple tax situations. Before using a free product, check the company’s website to compare the free product with costs and features of the company’s paid products.
  • You might run into hidden fees. For example, you might be charged a convenience fee if you pay your tax bill using a credit card.

5. United Way: My Free Taxes

My Free Taxes is a United Way program that offers free tax help using H&R Block software. Help is free with both state and federal tax forms. Support is available in English and Spanish.

Who’s eligible: Individuals or families with a combined household income of under $66,000 are eligible for free help.

6. More free IRS resources

You can get other kinds of free help from the IRS. For example, visit a local taxpayer assistance office — use this locator to find one near you.

You can also phone the IRS for help at 800-829-1040. Or, search online at IRS.gov for tax forms and publications.

The IRS website also offers information on:

7. Money Talks News ‘Tax Hacks’

Money Talks News has a lot of articles on tax topics. Search the Money Talks News website for “Taxes.” Or, if you’re having trouble with tax debt, check out “Get Help With Tax Debt” in the Money Talks News Solutions Center.

Do you think paying for tax preparation help is worth it? Share your thoughts in comments below or on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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