E-Filing State and Federal Taxes for Free

So, you need to file your federal and state taxes. Do you want to pay a fee for these services? I'm betting you don't, so here's my suggestion: Go here, to the IRS's free online filing FAQ, and see if you qualify to file your return electronically.

I'll go ahead and lay it out for you for your benefit. If you're an individual with an adjusted gross income of less than $54,000, you can file your federal (and possibly state) tax return online for free. Make sure you access the site at which you intend to e-file from here (don't worry, it's the IRS's official site), otherwise a fee may apply. If you want the IRS to narrow the list down for your individual needs, use the wizard.

Wait! If you know you don't qualify for free e-filing, you can still use any of the companies turned up in your IRS free filing search. You'll just have to pay the fee. Online Tax Return only charges $15.95 to do both your state and federal returns. Take my word for it, that's a great price. They (unlike a few others) also have free customer service seven days a week, and a toll-free number. They accept payment via credit cards and PayPal.

While browsing the list the IRS's free file wizard turned up for me, I noticed two big names: H&R Block and TurboTax. Well, I've seen a lot of commercials for these guys, so it stands to reason they won't try to trick me into paying a fee. TurboTax Freedom Edition is what I chose to use, and they even had a handy little questionnaire). You may also qualify if you actively served in the military, or if you qualify for EIC (earned income credit, usually meaning you have one or more children OR you were between 25 and 65 in 2007 and you earned less than $12,590). to ensure that I qualify. It also specifically stated that I can electronically file my federal and state returns for free (note: they specify that your adjusted gross income needs to've been $30,000 or less to qualify; for a free state return you must reside in one of these states: AL, AR, AZ, GA, ID, IA, KY, MA, MI, MN, MO, MS, NY, ND, NC, OK, OR, RI, SC, VT, WV.

Now I'm going to sum up what you can expect from TurboTax Freedom Edition 2007 (if you qualify for free e-filing).

Completely free service.
A secure connection.
Simple questions in plain English.
Your information will be saved as you go through, so no worries about having to start over due to a technical error.
Ten groups of possible deductions, with helpful explanations if you're not sure whether you qualify.
Free error checking.
Free direct deposit for your state and federal refunds (or you can opt for a check, which is also free).
A relaxed and friendly atmosphere.

Entering information about my W-2 was very simple. They had a list of corresponding boxes and I was able to enter my information quickly and review it with ease. They also verified a few things after I submitted my info, ensuring that I hadn't made any mistakes. Nearly all of their questions have "Explain This" out from them, in the event that you don't understand what is being asked of you. I found that very helpful because this is my first time filing a return. When I finished entering all my W-2 information, I was presented with the option to be guided through the rest of the form (income groups and possible deductions), or to select specific areas to skip ahead to. My federal (and later, state) tax refund was conveniently displayed in the upper left corner.

TurboTax walked me through seven possible income groups, which consisted of:

1. W-2 income
2. interest and dividends
3. other common income
4. investment income
5. retirement distributions
6. business income and expense
7. less common income

This was followed by entering information about possible deductions, split up into ten simple groups:

1. your home
2. you and your family
3. donations
4. cars and other things you own*
5. education
6. medical
7. taxes paid
8. retirement and investments
9. employment expenses
10. other (ex: alimony, theft, fees for previous tax prep or tax software)

*Did you know you might qualify for a deduction if you bought a hybrid car in 2007?

All in all, I found this service to be extremely easy. I was really nervous about filing my very first tax returns, but this was simplified and fast, without the confusion of tax jargon I was faced with when I tried to fill out the form myself. I highly recommend TurboTax Freedom Edition to anyone who a) has never filed a return before, or b) wants to maximize your tax deductions. Being only nineteen, I didn't qualify for most of the deductions, but in a few years that will have changed. Most of you probably qualify for several. I highly recommend you try TurboTax Freedom Edition 2007.