Elizabeth Renter, Nerdwallet
Free File is a program that allows the majority of taxpayers to file their federal income tax returns for free through participating software companies. However, the service remains in severely unused.
Despite 70% of taxpayers qualifying for free files, under 1.9% used the service in 2023, the most recent year when this IRS data is available. This shows a shortage of approximately 110 million income tax returners who may have missed the opportunity to file a free federal income tax return that year.
Looking at IRS data over the past decade, free file usage has been immersed in less than 2% in 2017 in one year. (2022).
Last tax season, the IRS piloted another free tax return option: directly file. This year, the program is available in more states and could affect the use of free files. For taxpayers, it opens up additional opportunities to file a federal tax return for free. These two programs and other filing options all have different qualification criteria and potential benefits.
Note: Despite recent confusion over direct file availability, both this and the free file are online and accepting federal tax returns.
Free File: Things You Need to Know
The free file program is essentially an agreement between the IRS and private tax software companies, known as Free File Inc., formerly known as the Free File Alliance. Companies within this alliance will provide taxpayers with the opportunity to file a free federal return if they meet certain requirements. Each year, income standards are set to ensure that 70% of federal taxpayers are eligible for the program.
For the current tax return season, filers who had adjusted gross income of less than $84,000 in 2024 are eligible for the program. However, there are additional provisions for the program’s tax software providers, and not all provide state income tax returns. The IRS Free File Search Tool helps you determine whether taxpayers are eligible and send it to the appropriate software website.
Direct files may also be available in your state
The new IRS Direct File Program will completely bypass the use of private software providers and allow taxpayers to file federal returns directly with government agencies. The program is free, but is currently only available in 25 states.
Income limits are less than $200,000 for a single filer with one employer and less than $168,600 for people with multiple employers. If married couples submit jointly, the total wage must be less than $250,000, and neither spouse can themselves exceed the single filer threshold. For married people, separately, the threshold is below $125,000.
Direct files do not support itemized deductions or many IRS forms, making them the best suited for people with simple returns. The service does not support state applications, so once federal returns are complete, it will direct you to the state’s free filing tool.
»More details: Direct file eligibility details
Beware of “free” tax software
No one wants to pay for what they can get for free, but taxpayers should be cautious when looking into the various free filing options. Both free and direct files are reputable options for qualifying people, but some tax software providers offer “free versions” that are not necessarily governed by the same rules.
»More: Additional Free Filing Options
To take advantage of the official program, please visit IRS.Gov. Also, if you are not entitled to free or direct files, please read carefully what is included in the tax software program you sign up to sign up for. Additional costs such as certain forms may require additional costs that are completely optional, such as audit protection or access to tax professionals.
Elizabeth tenant writes for Nald Wallet. Email: elizabeth@nerdwallet.com. Twitter: @elizabethrenter.
Article Data: Taxpayers missed the opportunity to submit for free, which first appeared on Nerdwallet.
Original issue: February 20, 2025, 2:35pm EST
