Yes folks, it’s officially tax season again. According to estimates from the Internal Revenue Service, more than 150 million individual taxpayers will be filing returns, or extensions, between now and April 15 for the 2016 calendar year.
It’s time to start thinking about your taxes
Tax time can be grueling for some folks given the need to dig through copious amounts of receipts. In 2016 alone, per the IRS, taxpayers wound up spending 8.9 billion hours complying with federal tax laws. For you math-phobic people, we’re talking about nearly 13,000 lifetimes. And it’s not hard to understand why, either, with more than 10 million words of U.S. tax code on the books, of which an average of 144,500 words have been added per year since 1955.
Yet for many Americans, the struggle of preparing their taxes is well worth it. A majority of taxpayers wind up getting a refund from the federal government, which last year averaged more than $2,700. For most individuals and families, that’s a nice chunk of change that can make a difference in paying down debt, building an emergency savings account, or investing for the future.
However, everything begins with finding the right tax-preparation service.
For those of you out there who are diehard do-it-yourselfers and have prepared your taxes by hand for years or decades, I’m going to strongly suggest you don’t do that going forward. TurboTax points out that the likelihood of an error being found on a Form 1040 (the basic tax form) done by hand is 41 times higher than an electronically filed return.
Whether it’s a math error or illegible writing, turning in a handwritten tax return is akin to playing with fire. Handling your returns yourself with the assistance of tax software, or bringing your financial documents to a tax professional who will, in turn, use tax-preparation software, is your smartest move.
125 million Americans could get free tax software or prep assistance
But there’s another smart move you could be making, and chances are most Americans aren’t aware of it. According to the United Way, which conducted a survey of 1,000 adults in Nov. 2015, 72% of respondents below a qualified income threshold were completely unaware that they could qualify for free tax software or tax-prep assistance. No joke folks. Instead of spending $39, $49, $79, or $100+ on tax-preparation software, you may qualify for the software and/or preparation assistance completely free of charge.
What’s staggering is just how many people could qualify for this free tax assistance offering from the IRS. Wage statistics released by the Social Security Administration show that more than 124.4 million people made between $0.01 and $59,999.99 in wages in 2015. Another nearly 4.4 million made between $60,000 and $64,999. Given that the IRS income threshold for at least some degree of free tax assistance is $64,000 for the upcoming tax season, this means at least 125 million Americans should qualify based on the Social Security wage data.
Here are three ways the IRS may be able to provide you with completely free tax assistance for the upcoming tax season.
1. The ability to download Free File software
The first bit of help comes in the form of Free File tax software, which can be downloaded from the IRS’ website as long as your income falls below $64,000. As noted above, this probably encompasses somewhere in the neighborhood of 125 million Americans.
The Free File software can walk you through the preparation of your taxes on a step-by-step basis similar to other tax preparation software that costs money. Once completed, you can e-file your tax return for free, which, as noted above, reduces the chance of an error and an audit.
If you make more than $64,000, you aren’t completely shut out, either. You’ll still be able to print Free File fillable forms and have the IRS handle the calculations for you so your math won’t be incorrect. However, you won’t have access to the step-by-step software, so you’ll need to be quite tax savvy if you’re going to go this route. Plus, if your writing isn’t legible, you could still find yourself with a problem. People with more than $64,000 in income are still best off using tax preparation software or a professional tax service, even if they have to pay for it.
2. Volunteer Income Tax Assistance
Individuals making less than $54,000 annually receive a double-dose of good news. Not only do they qualify for free tax software, but they can also benefit by receiving free tax-preparation assistance from an IRS-certified volunteer.
The Volunteer Income Tax Assistance (VITA) program, of which the United Way is a big player, helps provide tax assistance to lower-income Americans, the disabled, persons who speak limited English, and even the elderly, who may not be able to complete their taxes on their own, even with free tax software available from the IRS.
3. Tax Counseling for the Elderly
Finally, Tax Counseling for the Elderly (TCE) provides free tax preparation assistance for seniors ages 60 and up between Jan. 1 and April 15 each and every year.
Like VITA, IRS-certified volunteers are trained to help seniors with their unique tax situations (e.g., pensions and retirement distributions). However, unlike VITA, volunteers for TCE are often seniors themselves, so they understand the financial concerns that other seniors are facing and will thus have a keener eye toward certain types of income and expenditures during the tax preparation process.
Long story short, 125 million people can potentially prepare their taxes for free this tax season. Will you be one of them?
The $15,834 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $15,834 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.