Free Tax Returns, Are They Right For You?
Feb 11 2011 11:40 PM | Eva Rosenberg in Coupons & Discounts
These days, most tax returns can be done for free . With IRS’s FreeFile Alliance (FFA) offering free federal tax returns to anyone with an income under $58,000 – that’s a pretty good deal.Looking at one company’s free service TaxAct, we’ll create a hypothetical taxpayer. Nancy, in TN, is a single mom, with a 17-year-old daughter in college. Mom earns $25,000 at a job with no IRS withholding. She gets $6,000 for child support. She pays $3,000 in mortgage interest and property taxes of $950 and auto registration fee $75. Her daughter’s tuition is $3,000. Nancy contributes $600 to her company’s pension plan.
Nancy needs a Form 1040, Form 8863 for the education credits, Form 8880 Retirement Savings Contribution Credit. OK, TaxAct’s list of forms show these as being included.
It says Nancy gets a refund of $2,730. She doesn’t qualify for the Retirement Savings Contributions Credit since it’s not refundable. Her $933 tax liability is absorbed by part of her American Opportunity Credit, $900 is refunded to her. She does get $150 for the Making the Work Pay Credit. She gets $1,680 of Earned Income Credit.
Not bad for a free tax return!
Not only that, but it printed out a worksheet to help fill out the FAFSA student aid forms that are due at this time of the year.
The TaxAct software walks you through a series of life questions to help guide you through the tax return. One error it made was, during the final review, in the Alerts, it did not ask me to answer the questions about the Making the Work Pay Credit form. I had not filled it out on the first pass. Other than that, this software did a good job. Expect similar quality from the other members of IRS’s Free File Alliance.
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Eva Rosenberg, EA is the publisher of TaxMama.com , where your tax questions are answered. Eva is the author of several books and ebooks, including Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and other tax courses at http://www.cpelink.com/teamtaxmama.
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