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I live in North Carolina and I'm using the H&R Block website to file my taxes and finally at the end of everything they informed me that there's a limit to how much I could make last year and still be eligible for free file. My income was staggeringly close to this limit and yet I'm being asked to pay $29.99 to sign up for a premium account.

Given that this is the first time my income has been high enough to pay income tax, I don't know anything about how the IRS works. Does anyone have any suggestions about what to do in this situation or am I out of luck?

EDIT: Turns out it's actually $66.98 because they're charging for state filing too.

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    Do you make more than $29.99 over the limit? – not_a_comcast_employee Mar 5 '18 at 4:33
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    @user20574 could you then deduct the 29.99 and claim them back because your income after the 29.99 doesn't necessitate paying them? – DonQuiKong Mar 5 '18 at 11:06
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    Good question, @user20574. Yes, I made a bit more than $29.99 over the limit. – Kyle Delaney Mar 5 '18 at 17:19
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    I've gotten some great answers, but they're all answers to the question of what to do if my income is over the cutoff, and none of them mention the special case of my income being just a little over the cutoff. I'm guessing that means there aren't any special options available to me. – Kyle Delaney Mar 5 '18 at 17:31
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    I've protected this as it's hit 10 answers and some of them look fairly repetitive. – Ganesh Sittampalam Mar 7 '18 at 20:59

11 Answers 11

7

Free File eligibility is based on your Adjusted Gross Income. If you are just slightly over the limit, an increase in any of the above-the-line deductions will lower your adjusted gross income and could bring you below the Free File threshold.

If you haven’t yet contributed the maximum contribution for 2017 to a traditional IRA, you have until you file your taxes to make this contribution and lower your adjusted gross income.

Likewise, if you have an HSA, an additional HSA contribution could also bring you into Free File eligibility.

If you don’t want to do either of these things, just pay the thirty bucks. You make enough money to be able to afford it.

  • If I put money in an IRA or HSA this year, would that really modify my income for last year? – Kyle Delaney Mar 7 '18 at 21:02
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    @KyleDelaney Yes, but only if you designate your contribution as a 2017 contribution. (You need to inform the financial institution that you are contributing for tax year 2017.) The deadline is April 15, or whenever you file your 2017 taxes. – Ben Miller Mar 7 '18 at 21:13
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    Great answer. Contributing to an IRA or HSA is a good idea anyway, but in this case it has the added benefit of saving $30 too. – TTT Mar 7 '18 at 23:04
  • The IRA or HSA contribution deadline is April 15 or next business day (this year 17) regardless of filing. Depending on your numbers you can even file a return claiming the contribution(s), get your refund, and use the refund to make the contribution(s), if you're fast and lucky. Of course if you don't make the contribution(s) on time you must amend to increase your tax and pay that, with penalty and interest if after April 15+. And I wouldn't wait to the last day because sometimes the custodian has a small delay or glitch. – dave_thompson_085 Mar 9 '18 at 22:15
  • I managed to get my AGI under the limit by contributing to an IRA, and H&R Block is still demanding the same amount of money! It's as though my account has already been locked into pay mode and there's no going back at this point. I am so pissed. – Kyle Delaney Mar 23 '18 at 23:54
75

What they're charging you $30 for is the ability to get your refund sooner.

If you don't want to pay for that ability, then maybe it's time for you to learn to do taxes the old fashioned way (kinda).

Hit the IRS website http://www.irs.gov/ and download Form 1040, 1040A or 1040EZ and the accompanying instructions. They are all PDF files which have been rigged to let you fill them out right in the form with any modern computer.

I fill out my forms except for SSN and banking account data... then I save the form as PDF, add my SSN/bank, print them out and don't save the form. That way my SSN isn't lurking about on my computer. Sign and date in ink with your own hand, and mail them postal mail to the address in the instructions.

IRS now reads tax forms using OCR technology, which isn't as fast as e-filing since a human must open your envelope and set it on a scanner (they even scan the envelope for postmark etc.) So if you use their PDF form and their font selection, their OCR should pick it right up.

You kids these days have it easy with your fillable PDFs and your OCR. In my day, we had to hand-write every figure, in neat block lettering, and if you messed up you had to start over. Then we'd walk 15 miles to the post office, barefoot in the snow, uphill, both ways. With wolves biting at our heels. And we liked it! At least the Post Office was open til midnight on April 15 (that part actually was true).

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    @stanri it is not the government that is charging but rather that the tax preparation software people. I think that they started to let people below a certain threshold file for free precisely so the the government would not create a free option. I – Ukko Mar 5 '18 at 14:40
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    @stanri Probably because H&R Block is not a charity. They're in it to make money. They shouldn't do anyone's taxes for free, but I think they do it to "get you hooked", get you into the habit to the point where you don't know any other way to pay your taxes... then charge you when your fortunes improve... and even that is to gateway you into their customized "professional" services. (in tax season they tend to hire anyone who can add). This system, while craven capitalism, does at least provide many people free e-file. – Harper Mar 5 '18 at 14:43
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    @Harper I believe there is a law requiring tax preparers to prepare taxes under a certain threshold for free, but maybe I'm misremembering – Azor Ahai Mar 5 '18 at 16:40
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    @KyleDelaney I already possess a PC, printer, stamps and minor DTP skills, and I already go to the mailbox for other things... so I don't consider it worth $30. YMMV. Keep in mind I also don't have an H&R Block account and haven't shared my PII and financial data with them (to be hacked) - that would be a hassle for me, not for you since it's behind you. – Harper Mar 5 '18 at 18:09
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    @mehrdad IRS doesn't want to deal with consumers directly, so they have farmed out the job to commercial firms. However they didn't want to give a monopoly to one firm, so they provide a for-our-partners API and any business of sufficient resources can become a partner. So you have several companies competing for the e-file business. – Harper Mar 5 '18 at 22:54
37

If your adjusted gross income (AGI) is over $66k, you don't qualify for the free tax filing software anymore, per the IRS Free File site (link).

Some options:

  1. Pay for tax preparation software
  2. Use the tax preparation software on a relative or friend's machine, but don't e-file - print out your return and mail it in. (Note: Some software packages may have more than 1 e-file included - you may be able to utilize one of the "extra" e-files for free)
  3. Fill out your return on paper forms (free, but you'll need to mail the return)
  4. See if there are any special offers
  5. Use the IRS Free Fillable Forms option, which lets you fill in PDF like forms online, and still file online. You will have to do the math yourself, or follow the above points first.

From one perspective, not qualifying for free software is a positive thing - you're now making enough where you don't qualify for free software. It's a good milestone in your career path.

If you really don't want to pay for tax filing software, you can "borrow" the software installed on a relative or friend's computer and generate the filled-out paper forms to print and mail. It's more hassle, but if you don't mind one or more visits to use another person's computer AND the trip to the post office, it's a relatively inexpensive option. Some software, such as TurboTax, have a limited number of federal e-files included, so a "free" e-file may still be available if your relative/friend hasn't used all of the ones that come with the software purchase.

Since you mentioned H&R Block, one page on their site indicates some free options:

  1. Free Federal 1040-EZ (update: no longer available)
  2. H&R Block More Zero

One or more of the options above may work for you.

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    You can use the free file fillable forms to efile (at the bottom of irs.gov/filing/free-file-do-your-federal-taxes-for-free). I've done that for years. It's the same as filling out the paper forms, except that it does the basic math for you, and you can efile. Zero cost, regardless of income level. – Tristan Mar 5 '18 at 15:45
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    RE option 2: I use H&R Block software, which allows me to submit 5 federal returns with no additional charge. I regularly do mine and my mother's. – Jay Mar 5 '18 at 16:48
  • @jay fair point - I mentioned this later in the answer, but added some detail to point #2 to make this extra clear. – JW8 Mar 6 '18 at 5:56
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Normally, you can use "free file fillable forms", which is the IRS file for free option for higher incomes. The forms are web-based and very basic; aside from some basic addition and subtraction, you have to enter everything manually as you would on a paper form. You also have to manually enter information such as your W-2 information. This is free for all users, but does not have the same features as the tax software which is free for lower-income filers.

This may not be helpful for you as a first time income tax filer because one requirement is: "You must have your 2016 Tax Return".

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    FFF isn't just for people with higher incomes, it's an option for those of us using non-Windoze operating systems. – jamesqf Mar 5 '18 at 6:01
  • Do I have to print that out and mail it or is it available as an online service? – Kyle Delaney Mar 5 '18 at 17:26
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    @KyleDelaney FFFF lets you submit online. – Kevin Mar 5 '18 at 18:42
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    @Kyle Delaney: Yes, it's completely on-line. The only real problem is that if you have a mistake in the return, the error messages are not exactly easy to figure out. But it is possible: I think I went through 3 or 4 iterations this year. And it still didn't get the capital gains & qualified dividends right. But fortunately the error was in my favor, so I wound up getting back about $300 more than I figured. – jamesqf Mar 5 '18 at 19:03
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    @KyleDelaney Free File Fillable Forms has you go through the same process as filing the paper form, except that you complete the forms on your computer instead of on actual paper. – David Z Mar 6 '18 at 3:21
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Well, if your income is too high for typical "free" file services, you could use something like Credit Karma Tax which is free to use with virtually no income limits (so long as they cover your tax situation - which is pretty likely).

My income has been above the "free" file limits for years yet I've never paid to file taxes and always do so online. Maybe you've not looked for alternatives?

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    I have used Credit Karma Tax, which is indeed free without any catches. The only issue is that because you aren't their customer (you aren't paying) they don't care too much to fix issues. When I tried filing my state taxes (NY), they had a calculation error that would have cost me a lot of money. They eventually fixed the bug after a week, but had I filed without checking I would have lost a lot of money (or NY state would have rejected my filing). – Ramon Snir Mar 5 '18 at 13:44
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    @RamonSnir to be fair, you'd be in the same situation with all "free-to-file" tax preparation services. Since you're not paying, there's less urgency to respond to your concerns. – iheanyi Mar 5 '18 at 16:16
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    definitely true, I was comparing to services like TurboTax. I'll never pay again for a software like TurboTax (and hopefully will never be allowed to file for free), but I will be more careful around the free services. – Ramon Snir Mar 5 '18 at 16:20
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freetaxusa.com has free federal filing and $12.95 state filing. As far as I can tell, there is no income limit for the free federal filing.

4

Ben Miller has already answered with some ways you might be able to bring your adjusted gross income below the cutoff.

If you are unable or unwilling to do so, then your options are more limited:

  • Pay the $30 (which is actually a pretty good deal for tax prep software - I paid nearly $70 for mine this year)
  • Go elsewhere (several of the other answers proposed various possibilities)

Fundamentally, a limit like this must be a hard limit, or else it is meaningless. If they move it for you, then they need to move it for everyone else who's in a similar situation. So let's say that your income was $66,249 so you're over the limit of $66,000, but would be under at $66,250. So they make $66,250 the new limit. But then someone at $66,499 would have a reasonable argument that the limit really ought to be $66,500. And so on.

Let's reverse the situation, to make it more plain: Let's say that you have contracted with a company at a rate of $100 per hour. At your first pay cycle, you discover that they have only paid you $99 per hour. But their reasoning is, "$99 is staggeringly close to $100, so you really should just accept that." Following pay cycle, they pay $98/hour, for the same reason. Etc. No! No sane person would accept that. If they're not paying you $100, they're breaching the contract.

There are dozens of tax preparation companies and software packages. None of these are official IRS representatives. Their rules and regulations are contractual - what you must fulfill in order to use their service - not legal. Nor is there any requirement that you must use any such service in order to complete your taxes. By using their software to submit your taxes, you agree to abide by the contract as stated - which includes any income limits. If you don't like the limit, or any other clause of the contract, you walk away.

You also need to consider that this $30 is in lieu of sitting down face-to-face with a tax prep specialist, who will charge much more than $30 for their time.

  • I realize my assessment of the situation is necessarily clouded by my ego. Statistically speaking, there should be many people whose incomes are even closer to the limit. It's just one of those things you think won't ever happen to you, you know? – Kyle Delaney Mar 7 '18 at 21:17
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use credit karma, but double-check using turbotax

the "free file" limitations vary widely from one provider to another. just pick one of the tax filing websites that is free for your income level (e.g. credit karma for 2017). if you're concerned about the accuracy of the provider, simply complete your taxes in a name brand provider like turbotax (but don't pay to file) then compare the final numbers to the free software.

personally, i complete my taxes in 2-3 different providers every year and compare the results. so far they have always matched eventually, but sometimes only after reconciliation. it gives me some peace-of-mind to know both that the software is working correctly, and that i entered everything correctly. sometimes it reveals the shortcomings of a given app. for example, this year i used turbotax and credit karma. i discovered that credit karma doesn't handle 1099-r forms correctly if they have the "taxable amount not determined" box checked (but they clearly call this out on the 1099-r screen). to get around the problem, you have to update the "taxable amount" from your 1099-r yourself, which means it might not match what the 1099-r provider sent to the irs, which might be an audit flag. turbotax does handle that scenario correctly, but only after you enter in your non-deductible ira contributions at a later point in the wizard. that means for a few minutes, it shows a smaller refund amount than it should in the running total. not a big deal, but more confusing than it would have been if the non-deductible contribution came first in the wizard.

here is a list of free providers for the 2017 tax year

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    That article is from a year ago. Many of the programs have changed their thresholds since then -- for example, TurboTax limits you to an adjusted gross income of $33,000 this year. – Mark Mar 7 '18 at 21:44
  • @Mark good catch. i've updated my answer accordingly. – james turner Mar 8 '18 at 18:39
2

VITA sites prepare taxes for free if the return meets their qualifications. (I know this because I am a qualified VITA volunteer). This includes regular wages, some small businesses income, interest and dividend income, capital gains, IRA distributions and social security benefits, earned income credit and many other tax situations.

They have sites in all states that are open during tax season. All sites are staffed with helpful and friendly folk who fill out all tax forms and e-file for free. This includes state taxes for those of us lucky enough to live in a state that taxes income.

1

I was able to file my taxes for free last year but not this year. I am not a finance specialist whatsoever and after spending 45 minutes to an hour of struggling to find the correct form I simply gave up.

Take a step back and examine how much time you've spent on trying to figure out how to file your taxes. Think of how much your time is worth and compare it to how much time you've spent trying to fill out the forms for your taxes.

Ultimately I went with TurboTax, I answered their questions and was done in about 20 minutes. At the end they charged me $89.99 (Premium Plan), this included IRS protection, identity theft protection and some other stuff. In my opinion, being able to file my taxes in 20 minutes was already well worth the $89 dollars. Furthermore, they were able to get me $200 dollars more than last year.

Does spending time finding and filing the free solution outweigh getting your taxes filed for you and paying a small service fee at the end?

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    I like your point about evaluating how much your time is worth, but speed/size of refund aren't impacted by switching from free to paid products (assuming they were e-filed), and the IRS protection thing is them capitalizing on misplaced fear. – Hart CO Mar 5 '18 at 17:25
  • i guess i got my return faster this year because i filed it much sooner than last year? @HartCO – RAZ_Muh_Taz Mar 5 '18 at 17:30
  • That's likely, refund timing varies over the season by volume. – Hart CO Mar 5 '18 at 17:31
  • +1. If the OP's $66K income was mostly wages, then $29.99 is approx 1 hour of work (or less). Will the software save 1 or more hours of struggling? Probably. Unless the OP is severely in debt, this seems a worthwhile purchase. – Dragonel Mar 5 '18 at 21:47
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    It's not about what your time is worth. It's about skill. It's about learning how the tax system actually works, which is an important part of a financial education. Now don't you think a financial education is worth 30 or 40 hours a year, given how profoundly it affects your success in life? – Harper Mar 5 '18 at 23:06
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I use Credit Karma Tax and it has ALWAYS worked for me. They don't allow amended returns, so make sure you have ALL your forms ready to go. They are completely free and I had my Federal and State refund in 6 calendar days. I highly recommend them.

protected by Ganesh Sittampalam Mar 7 '18 at 20:55

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