Free tax sites

[Jerry1]

I posted awhile ago about the limit with Turbo Tax on only being able to file 5 returns electronically. I do a few other family members and one family friend and that adds up to 5. One of my friends (from the same family) wants me to do his kids returns. One is a minor and one is in college. Both just have W-2 income.

In the past, I would get around the limitation by printing and mailing. However, that turned into a mess given how backed up the government is. So -

I’m thinking the best thing to do is just help them do their own taxes (teach them to fish) using a free site. Can anyone recommend a good free site to use? I’m thinking of having them stop by and do them while I look over their shoulder. Alternatively, I could just do them as if I was them given that I’ll have all their information. That’s a last resort type of thing though because they really should learn this for themselves.

 

[USGrant1962]

Since you are familiar with TT, take a look at TT IRS Free File. https://freefile.intuit.com/

 

[SecondCor521]

It's not interview based and it's a tad clunky, but I like Free Fillable Forms. You put the numbers on the actual forms, and you can e-file federal for free (but not state last I checked).

https://www.freefilefillableforms.com/

On another note, I'd encourage you to let them know that they're eligible for Roth IRA contributions which is a good head start in life I think.

 

[Jerry1]

I live in Michigan and am looking for a product that can efile the state as well.

 

[cathy63]

Here are your options for Michigan: https://www.michigan.gov/taxes/0,4676,7-238-44070_46640-288774--,00.html

The TurboTax max income requirement is lower than the others and they don't mention including returns for the city of Detroit, so if you need those it may not be the best choice.

I use TaxSlayer when I volunteer at AARP Tax-Aide, and it's o.k. You have to know what you want to claim though, it won't suggest things the way TurboTax does.

It sounds like the kids are probably both dependents and hopefully the parents of the college kid are claiming the education credits on their return, so their returns should be really simple. You could always do them with TurboTax and then compare the output to whichever free site you use.

 

[SecondCor521]

Hmm. Depending on how cheap you want to be, you could see if Michigan's state tax folks provide any mechanism for e-file...I think some states do.

Another option is to start with the IRS free file site and find a provider that will e-file federal and state for free:

https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

ETA: Somehow didn't see @cathy63's post immediately above.

 

[Dreamer]

I used FreeTaxUSA for the first time this year. The federal tax return was completely free and the state tax return was $14.99. They efiled both yesterday and both were accepted last night.

Last year was the first year that I ever used a computer to do my taxes. I used Turbo tax and knew that I would do them on the computer in the future. I could not use Turbo tax this year, due to my operating system being too old in my iMac. I decided to try FreeTaxUSA and it was just as easy to use as Turbo tax and only $14.99. I will probably continue using them next year, even though I am planning on buying a new iMac with the M1 chip.

I would also watch them do their own taxes, so that they would know how to do them.

 

[Jerry1]

Here are your options for Michigan: https://www.michigan.gov/taxes/0,4676,7-238-44070_46640-288774--,00.html

The TurboTax max income requirement is lower than the others and they don't mention including returns for the city of Detroit, so if you need those it may not be the best choice.

I use TaxSlayer when I volunteer at AARP Tax-Aide, and it's o.k. You have to know what you want to claim though, it won't suggest things the way TurboTax does.

It sounds like the kids are probably both dependents and hopefully the parents of the college kid are claiming the education credits on their return, so their returns should be really simple. You could always do them with TurboTax and then compare the output to whichever free site you use.

Thanks. That’s a good idea to do them on my desktop version of TT first. As for the college credit, not sure what is best, but the dad said that they determined that the kids were going t claim the credit. He has a business and I don’t do his taxes so I can’t be sure which was is best.

 

[SecondCor521]

Thanks. That’s a good idea to do them on my desktop version of TT first. As for the college credit, not sure what is best, but the dad said that they determined that the kids were going t claim the credit. He has a business and I don’t do his taxes so I can’t be sure which was is best.

For AOTC, it's usually better if the parents claim, since part is non-refundable and the kids may not have enough taxable income to absorb that. But if he's already chosen which way to do it and has filed his taxes based on that choice, there's not much you can do.

The kids have to be tax independents to claim AOTC. If they are tax independents and parents paid OOP for qualifying expenses, then the kids can take those OOP payments into account for purposes of the credit and treat them as if they had paid them. If the kids are tax dependents, then the parents would have to claim the credit (or forgo it for 2020, see below). The rules for LLC might be different than AOTC, but I think they're the same.

If kids qualify for both, usually AOTC is better than LLC for undergrad, but the only way to properly confirm that AFAIK is to try both credits in a tax program and see which is better given the kids' tax facts.

Also, note that it may sometimes be beneficial tax-wise to treat some of the kids' scholarships or grants taxable in order to claim more AOTC. This is mentioned in a few places in the IRS documents themselves - either in Pub 970 or the instructions for 8863 or both. This strategy is especially beneficial if the kid doesn't have enough income to pay taxes anyway - having $3000 of McDonalds job income and $4000 of taxable scholarships works out the same as $3000 of job income and no taxable scholarships, but may end up getting more refundable AOTC.

One more thought - if the kids are early in their college careers and may go for more than four calendar years, it may make sense *not* to claim AOTC this year and save it for some later set of four years when the credit may be more valuable. But this risks losing the last year of credit, so I'd only forgo it if I knew the credit would eventually be claimed 4 times.

 

[Jerry1]

Thanks for that schooling on college credits. The dad is probably trying to save a few bucks by not having the person who does his business taxes doing his kids. Given the above, I’m going to suggest that he’s probably better off having the same person do all of his taxes so that various scenarios can be run.

Note, I was friends with his mom and dad. Dad passed and I’d do anything for the family, they’re good people. But this might be a time when I’m not the best person to do this and just because I won’t charge him doesn’t mean that’s the best financial choice. I’m a CPA, but I worked in industry. Only did taxes for two years - many years ago. So, I’m comfortable doing simple returns, but I don’t keep up on specific tax issues that don’t affect me and I’m not inclined to do a lot of research. Those days are past.

 

[RAE]

We used TaxHawk this year for the first time, and it was great. Very easy to use, and also free for your federal tax. Adding your state tax filing (Michigan, in our case) added $13, I believe. You can go to the TaxHawk website and get a promo code for at least 10% off, too.


Prior to this year, we used TaxAct, and the cost kept creeping up every year. So we tried TaxHawk, and I actually like it better than TaxAct - and you can't beat the price.

 

[cathy63]

Thanks for that schooling on college credits. The dad is probably trying to save a few bucks by not having the person who does his business taxes doing his kids. Given the above, I’m going to suggest that he’s probably better off having the same person do all of his taxes so that various scenarios can be run.

Note, I was friends with his mom and dad. Dad passed and I’d do anything for the family, they’re good people. But this might be a time when I’m not the best person to do this and just because I won’t charge him doesn’t mean that’s the best financial choice. I’m a CPA, but I worked in industry. Only did taxes for two years - many years ago. So, I’m comfortable doing simple returns, but I don’t keep up on specific tax issues that don’t affect me and I’m not inclined to do a lot of research. Those days are past.

This may be simpler than it seems at first glance if the dad earns too much to take the education credits. For single parents, AOTC phases out by $90K and LLC by $69K (double those numbers if married filing jointly), so a lot of parents can't take the credits anyway. The IRS has a useful chart on this: https://www.eitc.irs.gov/other-refu...e-education-credits/compare-education-credits

If the college kid is legitimately not a dependent of his parent(s), then he might as well take the maximum credit he can get for 2020. It's possible that if he just started college in Sept 2020 it would work out better to use the AOTC for tax years 2021 through 2024, but it's not really reasonable to expect you, the guy who's doing them a favor, to guess on that.

 

[Jerry1]

I’m sure the parent makes more than $90K. His business is doing extremely well. It’s one of the businesses that has been improved by COVID and was doing well even before that.

I’ll run it by him to have his guy look at it just to be sure. I don’t mind doing the favor as long as he’s clear on the decisions he’s making.