The Internal Revenue Service (IRS) has announced the extension of its Free File program through 2029, as part of a five-year agreement with Free File Inc., a consortium of tax preparation software companies. This program, which allows eligible taxpayers to file their federal tax returns for free using online software provided by private sector companies, has grown in popularity in recent years as more Americans prefer the convenience of filing online.
The IRS reported a significant increase in the usage of the Free File program this year, with 2.9 million tax returns filed through the system as of May 11, marking a 7.3 percent increase from the previous year. This growth highlights the program’s importance in helping Americans file their taxes without incurring additional costs.
Taxpayers with an Adjusted Gross Income (AGI) of $79,000 or less were eligible to access the Free File program for the 2023 tax year. The program offers guided tax software products from eight private-sector partners, including well-known providers like TaxAct, TaxSlayer, and TaxHawk (FreeTaxUSA). The IRS ensures that all participating companies meet strict security and privacy standards to protect taxpayer information.
For those with an AGI over $79,000, the IRS offers the Free File Fillable Forms, which provide a free option for preparing and filing federal taxes. This allows individuals with higher incomes to still benefit from the Free File program.
The multi-year extension of the Free File program provides stability and planning certainty for both the IRS and its private-sector partners. This partnership has been crucial in helping millions of taxpayers over the past two decades, and the extension ensures it will continue to be a valuable resource in the future.
In addition to the Free File program, the IRS has seen increased participation in other free tax preparation services. The Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs prepared 2.6 million tax returns this season, reflecting a growth of 200,000 returns compared to the previous year. These programs provide valuable assistance to individuals who may need extra support in filing their taxes.
The IRS also introduced a Direct File pilot program this year, allowing taxpayers to file directly with the IRS for the first time. This initiative attracted several hundred thousand participants from 12 states, with positive reviews from early users. However, the program has faced criticism from commercial tax preparation software companies like Intuit, who argue that it will ultimately cost taxpayers billions and undermine existing free options. A coalition of 13 Republican Attorneys General also opposes Direct File, citing concerns about potential conflicts of interest and its impact on low-income and vulnerable individuals.
Overall, the extension of the Free File program and the growth of other free tax preparation services demonstrate the IRS’s commitment to providing accessible and affordable options for taxpayers. By partnering with private-sector companies and offering online filing options, the IRS is adapting to the evolving needs and preferences of the American public.
