IRS offers free tax software

IRS Free File

Like it does every year, tax season has returned. But income earners need not pay extra money to prepare their federal returns. Starting today, free online tax software for the April 15 deadline is available through the Internal Revenue Service's Web site.

This year, four vendors offer free online software for taxpayers submitting 1040 or 1040EZ forms. The other 11 participating vendors offer free tax preparation based on qualifiers including adjusted gross income, state residency or the size of the tax refund. Other tax preparers may add their products in coming weeks.

Tax preparation vendors can still find ways to make money despite offering free online software. For example, companies may offer to prepare state tax returns for a fee or offer to open an Investment Retirement Account — contributions to which can be tax deductible.

This is the third year that the IRS and tax preparation software vendors have collaborated to ensure taxpayers can prepare free electronic returns. Last year, more than 3.5 million taxpayers used Free File, approximately 5.6 percent of all taxpayers who filed electronically.

The joint government and private-sector effort is a result of an earlier IRS endeavor to develop and distribute for free its own tax preparation software. "That led to discussion between industry and software companies than the alternative mechanism would be this free file alliance where the companies would make their own offers that would cover at least 60 percent of the public with the free offer," said Michael Cavanagh, executive director of Council for Electronic Revenue Communication Advancement.