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Do Your Taxes for Free (or Very Little), Online!

NEW YORK -- With tax season just around the corner, now is the time to start weighing your options for filing taxes -- and there are lots of ways to do it for free or at low cost online, AOL consumer adviser Regina Lewis observed on "The Early Show on Saturday Morning."

The IRS expects more than 100 million people to file via the Internet this year - but it may not be the way to go for everyone, Lewis notes.


You really need at least a little computer firepower on your side, because many of the numbers to be entered on your 1040 and its schedules depend on other numbers, whose values can change as you complete the return. It can be difficult to keep up with all these cascading calculations and recalculations.

And there is an array of computer-based programs to help you do your tax returns accurately - and many for free.

Not only that, the IRS claims taxpayers who file online have a reduced error rate: one percent compared to nearly 20 percent with a paper return. According to Consumer Reports, when you use a store-bought CD, software download, or online tax-prep program, there's less likelihood of errors. That's largely because IRS employees don't have to re-enter your data. Still, before you click to file, it's a good idea to print out a hardcopy and proof read it on paper. You'll catch a lot of errors and omissions that way. And remember to save that hard copy for next year, in case your computer crashes.


Through the IRS Free File Program, 70 percent of all taxpayers -- about 95 million people -- can get free online tax preparation and e-filing. The IRS, which saves money every time a taxpayer files electronically rather than on hard paper, promotes a program called Free File Alliance that offers free tax prep computing from 19 providers. The main requirement is that the taxpayer have a 2010 adjusted gross income of $58,000 or less. The more complicated your tax situation, the less likely one of these freebies will suit you. But for many people, especially young adults with starting salaries and few deductions to claim, it should cost you little or nothing to file a return.

Go to, where you will find participating software companies who make their products available through the IRS site. No matter which one you go with, all of the software remains on the Free File company's web site and your return is filed from there. All Free File company sites are equipped with the latest secure encryption to protect your privacy.

However, most of the IRS Free File options do not cover state returns. Fees to prepare and file your state return vary by company, from $15 to about $28.


TurboTax, TaxAct and H&R Block all have free federal editions available to all filers. The way these tax programs work is that you start the preparation on their free level, and they prompt you to upgrade only if your return warrants it -- and you still wouldn't have to log out of the software and start over. Also, most major online tax software companies can import your tax return from last year into their forms, so you have a head start on things.

Generally, these programs allow you to file for free for the most basic returns, such as forms 1040-EZ. Charges apply for more complicated returns or additional schedules

Also, fees for filing state taxes range from about $10 - $37, depending on the site you choose, but it's best to file both federal and state using the same service, so you have everything in one place.

There are a lot of options to choose from, but you may be best-served to go with some of the better-known tax preparation programs.

All offer electronic filing, direct deposit refunds and even a number provided by the IRS confirming receipt of an e-file submission. Those services that cost more usually involve a greater amount of tax advice, support options and hand-holding than cheaper alternatives.


This is the nation's top-selling tax-preparation software and, like most major tax preparation software, is up-to-date with all the very latest tax law changes (we had quite a few this year), so you can be sure you return is accurate and you are taking advantage of all eligible deductions.

TurboTax is best-known for its ease of use and support during the filing of your return, such as telephone support and "live chat" from a TurboTax expert. There are free basic returns ($27.95 for state), then pricing tiers ranging from $29.95 to $74.95, depending on the complexity of your return (plus $36.95 for state).

For $29.95, you can get the Deluxe Package, which will import all your old tax forms, as well as walk you through the steps necessary for filing your 1040s and your W-2. The highlight of the Deluxe Package is that TurboTax guarantees it gets you the highest refunds possible and maximizes deductions. This is the right package for most employed homeowners.

The visuals are really nifty, with a completion bar and running totals of federal and state refunds or balances due. Turbo Tax's Live Community forum is accessible from every page in the system, and help tools are extensive. TurboTax's resource center is open to the public with lots of estimators, tools and tax law updates.

H&R Block at Home

Also offers free basic returns (state $35), and for more complex returns, prices ranging from $19.95 to $49.95, plus $34.95 for state. Its Deluxe Package for $29.95 is recommended for employed homeowners. H&R Block at Home offers lots of customized guidance for various occupations, rental property owners and investors. H&R Block also offers a service called the Best Of Both Package, in which you can prepare your taxes online and file your return with the support of a tax professional. For $79.95, a tax professional will review, correct and submit your return for you.


The free edition has all the guidance and forms for Forms 1040, 1040A and 1040EZ, as well as Schedules A, B, C, D, E, and more. The free product includes all the forms taxpayers need to e-file. A more complex return is about $10. For about $18, their Ultimate bundle combines a complex federal return and one state tax return. Otherwise, state returns range from free to about $15, depending on the product. All forms you will need are available. TaxAct employs useful features, such as a tax glossary with definitions of over 275 terms you may not be familiar with. They will also import your previous year's return, even if you filed it with different software, and a tab on the side of your screen will explain to you exactly which forms you are using and what they mean. Telephone support carries a one-time fee of $7.95 for the entire tax year.