FreeTaxUSA is a tax preparation software program that is exactly what the name implies – free.
At least it is for filing your federal income tax return. Like many other free tax prep services, they do charge a fee for e-filing state income tax returns.
They provide the free version of the program, but you can upgrade to the deluxe program for a ridiculously small fee.
What’s more, FreeTaxUSA can enable you to prepare your tax returns for free, even if they are more complicated. For example, many free tax prep software programs offer you the ability to file for free under certain very limited conditions. Free may only apply if you have only W2 income, minimal interest and dividend income, and only the most basic itemized deductions. If you have anything more complicated than that, free goes out the window, and you’re directed to a premium plan.
That’s not the case with FreeTaxUSA, and that’s why this software is well worth a close look.
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FreeTaxUSA Features & Tools
FreeTaxUSA offers many of the features and benefits that you typically find with paid tax software programs, or those that charge much higher fees.
FreeTaxUSA accommodates filing more complicated returns. This includes taxpayers who are self-employed, have rental income, have K-1 income from an LLC, partnership, or S corporation, or take a home office deduction. You can do any and all of these with FreeTaxUSA, even with the free version.
FreeTaxUSA Refund Maximizer. This is a tool that double checks your work on a return filed with another tax prep software program. You enter the information from that return, and the maximizer will analyze it to determine if you could have gotten a bigger refund with FreeTaxUSA.
Also, you can import prior year’s tax returns from TurboTax, H&R Block, and TaxAct.
Free state filing for taxpayers under 22. If you are under the age of 22 as of the end of the calendar tax year, you are eligible for this benefit. FreeTaxUSA normally charges a small fee to e-file state income tax returns, but they are waived if you’re under 22. This can be real savings for taxpayers who have teenage or young adult children who have sufficient income to require filing a tax return.
You can pay program fees with your tax refund but it costs more. If you want to pay with a tax refund, you have to pay an extra $19.95 on top of the normal fee. There’s no added cost if you pay with a credit card. If you have a card, I would recommend using that instead of paying more using a refund because it’s far more expensive to use a tax refund. (also remember, when you opt to pay with a refund, you’re essentially asking for a small loan until the refund comes in)
Accuracy Checker. FreeTaxUSA uses a real-time accuracy Checker to check your work throughout the preparation process. If the program determines that you may have made a mistake or an omission, you’ll be alerted. This will help to keep you on track throughout the process.
Accuracy guarantee. FreeTaxUSA guarantees the accuracy of your return as filed. You will be reimbursed for IRS imposed penalties and interest for any errors, omissions or other misinformation that is the result of the program software. (Penalties and interest on state income tax returns is not covered under this guarantee.)
Customer support. Email support, included with all services, is 8:00 AM – 11:00 PM Eastern Standard Time every day (including weekends). They report answering most emails in under 20 minutes. Particularly complex questions might take up to 24 hours.
FreeTaxUSA Free Version
The Free Version offers most of the features and tools that you can get with the Deluxe version. It’s free to e-file your federal income tax return (which is how you get your tax refund as fast as possible), but you will be charged a fee of $14.99 for each state tax return that you need to file. This is very common in free tax software packages. That’s because while there is just one e-file process for federal, there are dozens for state income tax returns – one for each and every state.
Once again, one of the major advantages to using FreeTaxUSA is that supports virtually any type of income tax return. That’s a very unusual benefit of using this program.
For the free version, customer support is available by email, but not by live chat.
Returns are stored in PDF format. There’s no limit on how many returns you can store, and no charge for doing so. You can also download and either store or print your returns on your own computer.
FreeTaxUSA Deluxe Version
The FreeTaxUSA Deluxe Version has all of the functionality of the free version, but it adds several important premium features. Adding those features as well worth the price. The paid version costs $6.99 for your federal income tax return only. And like the free version, there is also a fee of $14.99 for each state income tax return filed.
Those added features include:
Live Chat. During tax season, customer contact is available from 9:00 AM to 11:00 PM Eastern time. That gives you an extra five hours each day to access support. Like the free version, customer support is not available on weekends or holidays.
Free amended tax returns for Deluxe users. You can file amended federal income tax returns for free when you use the Deluxe version. However, if you need to file an amended state income tax return, FreeTaxUSA charges a fee of $17.97 per return. (if you used the free version, amending costs $17.97).
Priority Support. This feature enables you to get a priority on your inquiries. That means that your email questions will be moved to the front of the line. That will put you ahead of users who are working only with the free version.
FreeTaxUSA Audit Assist. This feature gives you access to audit specialists who can help you in the event that you receive a notice from the IRS about an error, or notification of a pending audit. The staff will help you to prepare for the audit, though they cannot actually represent you in person.
Support will include helping you to interpret IRS notices, and determining necessary documentation for your response or in preparation for an audit. They will also provide you with options in the event that you are unable to pay a tax liability.
It’s free, so it can’t be 100% roses, right? There are some (reasonable) drawbacks to FreeTaxUSA:
Limited hours for customer support. Customer support is available daily until 11:00 PM Eastern time – which means that it cuts off at 10 PM central time, 9 PM Mountain time, and 8 PM Pacific time. This is important to remember since you’re probably doing your taxes during these “after hours” times.
Data importing limitations. The program is unable to import basic data, including information from W-2s and 1099s, from popular payment processors. This can be especially problematic (i.e. annoying) with investment brokerage statements. If you are an active stock trader, you may have several pages of trades that need to be entered as capital transactions. These will have to be done manually, which may require considerable time and effort.
FreeTaxUSA vs. TurboTax
FreeTaxUSA and TurboTax both offer free Federal tax returns, so which one is better?
TurboTax has been around for quite some time and their packages range in price from their free product all the way up to $199.99+ for their TurboTax Live product. Their self-employed product, which is designed for folks with business income and expenses, is their highest software tier at $119.99+.
The Free Edition is similar to FreeTaxUSA but with a few benefits. You can take a photo of your W-2 to start your return and automatically pull data from some payroll processors. There are also a slew of tools, like TaxCaster and MyTaxRefund, all included.
If TurboTax’s product is better, how is there a comparison? It comes down to price. And there’s a big difference.
FreeTaxUSA and TurboTax both offer a free tier but the price goes up significantly if you can’t use the free tier with TurboTax. FreeTaxUSA Deluxe is a $6.99 whereas TurboTax Deluxe is $59.99. It goes up even more if you have investments and rental property ($89.99 for Premier).
The state return on FreeTaxUSA is $14.95 but free on TurboTax’s free tier. However, once you go to TurboTax’s Deluxe tier the state price is $39.99 each. Both product prices have already included e-filing fees so it’s a true comparison.
Will FreeTaxUSA Work for You?
Despite a few program limitations, FreeTaxUSA is well worth using. It has far greater functionality than many other free tax preparation software programs, and even the Deluxe version costs just a fraction of what it does with other popular paid programs.
Due to the lack of importing capability, you must expect to spend more preparation time with this program then you will with TurboTax, but you will also be saving a considerable amount of money on the program fee.
The ability of FreeTaxUSA to accommodate even the most complicated tax returns is virtually a built-in advantage. Most competing free tax software programs can only do the most basic returns. If you have anything more complicated, you’ll have to move up to a premium version.
Even the popular paid programs use a graduated service level. For example, you may pay $50 for a program that does basic returns, but then be required to pay $100 if you operate a small business. There are no such up-charges with FreeTaxUSA.
If you want more information, or if you want to sign up for the program, check out the FreeTaxUSA website.
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I had signed up for FreeTaxUSA last year and planned to use it this year. I have a VERY simple return. When I finished both returns online, I was told that nothing could be sent out yet due to changes in the tax laws. In addition, I would have to send the returns myself rather than their efiling for me.
For my purposes and for these reasons, I did not see any reason to spend $12.95 when other programs are completely free, like TurboTax and ones that some of the more popular credit websites are starting to offer. I would be interested in what you think.
I didn’t have any problem sending my returns last year. It filed for me – free for Federal and about $10 for state.
Bernz JP says
This is exactly what I used last year to file my kids’ taxes. They only have part-time income with the simplest return and I found this FreeTaxUSA website very easy to use. Will definitely use this again for their taxes this year.
Jim Wang says
That seems like a perfect use case!