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It’s that time of year – time to gather your records and prepare your 2024 tax return. Many HD contributers are involved the IRS’ Voluntary income Tax Assistance (VITA) program, helping to prepare free tax returns for qualifying individuals. This is an excellent program for lower income tax payers. The linked website has a tool for finding a local site. If you have family, friends, or neighbors who might benefit from this excellent program, please think about letting them know. If you are looking for a volunteer opportunity that combines your financial and tax acumen with a real need, consider getting involved. This is my 7th year, and I have to say the volunteers I’ve worked with have consistently been some of the smartest, and most caring, individuals I’ve met. Good luck with your taxes.
Rick, every year I get J.K. Lasser’s Your Income Tax. The 2025 version is around $14. From Amazon—a bargain for reliable information and far more satisfying than calling the IRS. Ernst & Young has a good guide too. Both are free from your local library. Great for those whose taxes are not too complicated. I’ve also found Bogleheads to be a fairly accurate source for some tricky state information.
After having always prepared our tax returns manually, I was alerted to FreeTaxUSA by Marjorie, with an additional plug from Dan. I researched it further and was impressed especially by the high marks it got on the Bogleheads forum.
So I gave it a try with this year’s return and I was extremely pleased. It was easy to sign up for, easy to use, and yes, completely free (without the extras, which I didn’t need). The whole process was fast, intuitive, and user friendly.
The main reason I’d continued to do our taxes manually was that there always seemed to be some oddball and unavailable form I needed, or I wanted to include an explanatory page of some sort. This year at least that stuff was unnecessary so I breezed right through the FreeTaxUSA process.
Even with the totally free version, the support was excellent. I submitted a few questions and received prompt and helpful replies. I’m still a little unclear on whether I can include supplementary documents in the future if need be, such as explanations of QCDs (Qualified Charitable Distributions), but I’ll cross that bridge next year when I begin with those.
One of my top pet peeves with the IRS is the dreaded Form 6251 for AMT (Alternate Minimum Tax)—you know, the long, complicated one you have to fill out completely before being told at the end that you don’t need to file it. Just having FreeTaxUSA automatically do that and spare me even thinking about it was a gift from heaven.
So, thank you, Marjorie and Dan, for this Hall of Fame tip!
Andrew, Harry Sit who writes The Financial Toolbox is also a proponent of Free Tax USA. He is helpful with questions about the site and maybe could answer your questions about QCDs and supplemental attachments. He’s been helpful to me.
Glad you found it easier to prepare your taxes this year. Fortunately for you Texas doesn’t have state income tax form. N J goes out of its way to make things unclear.
Marjorie, thanks for another good tip. I just checked out Harry Sit’s website The Finance Buff – Like a Friend Telling You About Money and ended up reading through his blog posts on various subjects for about an hour. Interesting stuff written in layman’s language.
You’re welcome, Andrew. One of the best things about Humble Dollar is the information we can share with each other.
Andrew, so glad FreeTaxUSA worked well for you. I have not done a QCD there either, but I have done some pretty involved things, such as sale or business property and installment sales that included capital gains. The software handled those effortlessly, so I’m confident QCDs will be easy as well.
Tax preparer William Drummond says at Quora: “FreeTaxUSA does not support the creation of county or city tax returns.” TurboTax does, and since I have to file a school district tax return as well as the state income tax return, I pay the higher price for TurboTax.
I’ve been mostly happy using e-file with TT since 2015 — mostly, not completely, as there have been a couple pesky TT quirks in that school district return that I’ve had to figure out.
TT can directly import some forms, e.g., 1099-R. Using TT, you enter other data by answering questions. Sometimes the questions are ambiguous. Even without paying for the “live advice” in the more expensive TT tiers, though, you can post a query to the TT community. I did that this time and received an answer within a couple hours.
Intuit, the maker of Turbo Tax, also makes a powerful professional tax software, so I’m not surprised it also does city and county taxes. I know that FreeTaxUSA can’t handle local stuff.
https://www.starkman.com/articles.shtml
Rick, The above link provides good information on taxes I’d like to share, from
Jay Starkman, an award winning CPA from Atlanta, Georgia, whom I follow and who has written many articles on taxes for the Wall Street Journal. I think that both you, Rick, and Bill Perry might be especially interested.
Researching taxes is a favorite interest of mine. I never give up until I find the answer that I feel fits the question—I’m unrelenting in my quest.
And There are some areas where you just have to do the best you can.
To Bill Perry…You are right about free fillable forms. Too clunky. Free Tax USA much easier, and smoother.
Highly Recommend to those with some Knowledge of taxes. Thanks for all your advice. Even with all my researching, the jury is still out on some questions.
Thanks Marjorie. I look forward to learning researching the Starkman site. It is amazing how there is always a unique interpretation or application of tax laws. Everyday at tax prep it seems we stumble upon some new thing to research. I’ve used the free fillable forms on occasion, but I’m 99% TurboTax for personal taxes, and Tax Slayer for AARP.
Rick, I was a tax-aide volunteer in the past and will probably resume that in the future. As they using Tax Slayer now?
Yes, they are using Tax Slayer. I’ve gotten used to it. The interaction with NJ State taxes is a bit clunky and requires some manual steps, but all in all it does a good job.
Agreed on the states, especially on Ohio school district taxes.
I agree completely with your assessment of Tax Slayer. State returns are unnecessarily cumbersome.
Marjorie, thanks for the tip, and Dan for the plug, of FreeTaxUSA. I see that it, and its sister co., TaxHawk, have lots of favorable mentions in the Bogleheads forum.
You’re welcome, Andrew. See my new post giving more information. I remember you wrote about this subject before, in either one of your comments or in an article,so this topic wil be of special interest to you.l
Many people who cling to paper filing don’t understand/trust the internet. They think paper filing keeps their information off computers, not understanding that their data eventually ends up in the same place as those who e-file. They ignore the risks involved with using snail mail; lots of strangers handling mail that is easily recognized as a tax return.
I’m in my first year as an AARP TaxAide volunteer. I’m impressed with the entire intake, tax prep, and quality review process used in order to ensure accuracy.
Many of the preparers also do tax returns for friends and family outside of AARP’s system. I was surprised to find out that many used the same service that do. Federal returns using Free Tax USA are truly free, and can handle about anything you can throw at it. It also does state returns for a reasonable fee.
For a number of years I have used the IRS free file fillable forms (FFFF) for our personal 1040. It is very clunky but if your adjusted gross income (AGI) exceeds $84,000 and know what you are doing with taxes it is a free way to electronically file your 2024 over $84K AGI return. I filed our relatively simple 2024 return about two weeks ago and the IRS deposited our small refund today. My goal every year is to be neither over or underpaid but I usually choose to make and have a safe harbor amount of estimated tax and withholding based on my prior year tax to avoid possible underpayment penalty.
If your return is complex I would discourage using this method of filing. It basically has no diagnostic tools or error messages to warn you when you are about to do something stupid. You have to do much of the math yourself. No state returns are available with FFFF. FFFF can also be a useful tool for just filing a federal extension of time request (4868) electronically.
I am a mostly retired CPA (I still work part time) with over 40 years of full time tax experience and a degree in accounting earned in the 1970’s so what I consider to be a simple 1040 tax return may not be simple to others.
You can read about FFFF here – https://www.irs.gov/e-file-providers/free-file-fillable-forms
I also use the free to me AARP tax calculator to check my own tax calculations before hitting the send button on my FFFF electronic return. You may have to be a AARP member to use their tax calculator. A second set of eyes reviewing my work (for our return my wife acts as my reviewer) is a good quality control procedure. I also put the completed return aside for a few days and cold review my own work and utilize a current year 1040 tax preparation checklist to see if I have forgotten anything before transmitting our return.
You can also choose to print your return using FFFF and mail it in on paper but my experience tells me filing a paper return is likely the worst choice for anyone that has a return that is capable of being filed electronically. The IRS can make mistakes inputting a paper return and their input errors increase with the complexity of the return. If the IRS makes input errors on a paper filed return you will likely be dealing with unwanted correspondence from the IRS generated by their computer system. There are still people with personal returns that can only be filed on paper but those are now becoming rare and few. I hope you are not one of them.
I think the complexity of our tax code is a disgrace. Our political leaders can and should do better with the tax code, regulations and administration complexity. I hope they do.
Thanks Rick and the other volunteers who serve their community by preparing returns for those in need of the help.
I use FFF for a moderately complex return. I typically file Form 1040, Schedule 3, Schedule B, Schedule D, some forms 8949, Form 1116, and Form 8995. Of course, I have to do a Dividends and Capital Gains worksheet, a Capital Loss Carryforward worksheet, and a section 1250 recapture worksheet.
I don’t consider any of this a big deal, or particularly esoteric. The important thing is the read the relevant IRS publications for any rules changes, and to review your forms and calculations carefully.
Hi Ormode,
I think what you are doing using this clunky software can help build a deeper understanding of how the investment decisions you make can impact the cost (both money & time) you incur. Limiting my tax costs I incur is a major factor in my investment actions and usually is fourth in priority behind choosing to buy broad based low cost index funds, my asset allocation and then my asset location.
One tax form you note you file the 1116 regarding the claiming the foreign tax credit which can be a bear. In my career I have worked with numerous major tax software packages and I have often seen errors related to the 1116. In a nutshell return preparers input the broker statement amounts correctly into the tax software including the foreign tax withheld but the broker statement totals for dividends, qualified dividends and capital gain dividends then flow automatically to the 1116 but the actual foreign source income is usually a different amount and is buried deep in the bowels of the broker statement. Separate input may be required. Often the foreign source income ends up being overstated on the 1116.
Broker statements with multiple foreign sources will sometimes report foreign income and withholding on a fund by fund basis and sometimes as percentages of the totals or the foreign source. No problem, just create a spreadsheet. Multiple brokers with foreign source income? No problem, each 1116 has three columns and if that is not enough the software will create multiple forms 1116. The preparer has to then input even more data the preparer created.
There is a opt out to filing the 1116 for a 1040 if your total foreign tax withheld is less than $600 (for a married filing joint 1040) or $300 (for other 1040 filing status). Use the opt out if you can. Other non-individual entity returns may not allow the opt-out for not filing the 1116.
I dread doing partnership returns that have foreign tax withheld. I would rather wax my car in the wintertime. The credit limitations on foreign taxes paid is just a complete waste of time that gets duplicated again when the partner’s K-1 pass-through items are reported on the 1040 for each partner.
If you end up with a foreign tax credit carry forward you have to keep your foreign tax carry-forwards separately for regular tax and the alternative minimum tax. If you bought a fund for your kiddie and they have a filing requirement but no current year tax but you want the benefit in a future year then you have to file the 1116 to preserve the carry-forward. Can we please repeal the AMT and kill the kiddie tax? Those compliance cost benefits next to no one.
More needless tax complexity.
William, thanks for the useful FFFF information. Your experience, expertise, and willingness to help the HD community is one of the best features of the site.
I completely agree with your QC process. I did a review of our return earlier this morning and found I fat-fingered my wife’s SS amount, adding about $12K to our taxable income. Correcting it reduced the amount we owe significantly.
I’ve heard from a number of folks at AARP TaxAide that those who e-filed early have received their refunds within a week or two.
https://www.aarp.org/aarp-foundation/get-involved/tax-aide/
Link to Volunteer
Here is the link for AARP. If there is not an AARP chapter in your desired area I would use the locater tool on the VITA link above and find out what organizations are in your area, and then contact them directly. Good luck.
Thanks, I had the same question as Mr. Flack.
Rick, is there a link specifically for those who want to volunteer?