For the 2023 tax filing season, the IRS has several free options for anyone who earned less than $79,000 (Adjusted Gross Income). My partner had no earned income in 2023, but they did receive a $260 refund from the State of Minnesota in 2023. It turns out that Minnesota missed the deadline for this to be considered a COVID relief payment. This means that everyone in MN who received the refund will have to claim it as income on their federal taxes. Unfortunately, Turbo Tax and H&R Block do not allow form 1099-MISC under their free version. They want you to upgrade to their paid version in order to complete your taxes. This is going cause a lot of their Minnesota customers to look for other tax filing options.
Typically, you are not required to file taxes if you are single and earned less than $13,825. But, in order to qualify for medical assistance, it is a good idea to file taxes even if you made less than the minimum. We had been using Turbo Tax for the last several years. But this year, Turbo Tax asked us to upgrade to their paid version after we tried to enter form 1099-MISC. I had heard that the IRS was offering free tax services, so I went to their website to see what was available. I found out that you can't file for free on the IRS website, but they have partnered with several companies that offer free tax services. On the IRS website there is a filter tool that quickly narrows your options. The tool returned 3 companies that met our criteria for filing federal and state taxes. The 3 companies were "Tax Slayer", "FreeTax USA", and "OLT (Online Taxes)". These companies are located in Georgia, Utah, and Missouri. All seem fairly equally capable, but I found more positive reviews for Tax Slayer and FreeTax.
Because my tax situation is more complicated, I will most likely be using Turbo Tax again this year. I don't have any earned income, but Turbo Tax makes it easy to import all of my investment information. Last year Turbo Tax charged me $158 for using their Online Self-Employed product. It saved me some time, but I don't feel like it was worth it since my adjusted gross income was under the minimum. I didn't have to pay any state or federal taxes, but I didn't get a refund either. I shouldn't have to pay 1.5% of my gross income to file my taxes. Our family has a small trust which also complicates tax time. It costs $200 each year for tax services on the trust, that's in addition to the 1% annual service fee the bank charges. Beneficiaries have to wait until late February for the trust taxes to be completed before they can finish their taxes. Online tax service companies will definitely feel the impact of the IRS's free tax filing options. But not everyone can use a free tax service. In 2020 among 148 million individual tax returns filed, just 4.2 million were filed for free. An estimated 70% of taxpayers are eligible for IRS Free File, but only about 3% used it in 2022. Now that the word is out, the percentage using the free service will surely increase. I wouldn't invest in any of the paid tax service companies as they will likely see 50% of their business disappear in the next year.
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