If you are a U.S. citizen or resident alien, you can file your tax return electronically by going to the IRS website and selecting the option “Free File.” There you will find tax preparation and filing software made available as a result of the Free File Alliance, a partnership between the IRS and private companies in the tax software industry. This alliance was formed based on a government directive to provide free electronic filing to as many taxpayers as possible who need to file an individual income tax return.

Some of the advantages of filing online include:

• For the majority of taxpayers, this option is free.
• If you have a personal computer, modem, and Internet access, you can e-file at any time, day or night, from your home.
• If you don’t have a personal computer, you can go to an Authorized IRS e-file Provider and have your return filed electronically.
• Filing electronically may reduce the time it takes to prepare your tax return.
• You can get a refund quicker, by direct deposit in as few as 10 days.
• If you owe tax, you can E-pay by authorizing an electronic funds withdrawal or by credit card. Payment can be scheduled as late as April 15th.
• You can prepare and file federal and state returns together. The tax preparation software automatically transfers relevant data from the federal return to the state return.
• Your return is automatically checked for arithmetical errors, missing data, or inconsistencies, or the system simply does the calculations for you, based on the information you enter.
• You can sign electronically using a PIN and get electronic acknowledgement of acceptance within 48 hours.
• There is no need to send in W-2’s.
• Your security and privacy are protected by strict IRS standards.
• The chance of an audit of an e-filed return is no greater than with a paper-filed return.

Free Filing Step By Step

Getting Started

The first step in filing your tax return electronically is to go the IRS website and then to the “Free File Home – Your Link to Free Online Filing” page. When you click the “Start Now! ” button, you will be taken to a list of Free File Alliance Companies.

Determining Eligibility

The next step will be to determine your eligibility, based on each participating company’s description of their criteria for free filing. By clicking on “More details” you can obtain a description of the company’s service, including the fee it charges if you are not eligible for free filing.

Selecting a Company

Once you determine you are eligible, and you choose to use a certain company, click on the company’s title. You will be taken directly to their website to begin preparing your tax return. You can select a company even though you are not eligible for their free file service. In this case, you will be charged a fee for filing with that company.

Guide Me To A Service

If you are not sure which Free File company you want to use, you can click on the “Guide Me To A Service” button. You should have the following information available in order for this option to guide you to the appropriate Free File companies:

• Your age, and your spouse’s age if filing jointly (your age as of December 31st)
• Your estimated Adjusted Gross Income (AGI) for the year
• Your state of residence
• The number of W-2’s you (and your spouse) received
• Which form you plan on filing: 1040EZ, 1040A, or 1040
• Whether you are eligible for the Earned Income Tax Credit
• Whether you or your spouse received Military pay
• Whether you expect a refund, and how much

You may not know the answers to these questions, such as your Adjusted Gross Income and the expected amount of your refund, until you actually complete your return. If your situation hasn’t changed since last year, you may be able to use last year’s tax return to estimate your AGI. If you filed as single last year and are filing jointly this year, don’t forget to add your AGI and your spouse’s AGI if you are using last year as the basis for your estimate.

In any case, AGI is calculated as follows:

Taxable income from all sources:

• Wages, salaries and tips
• Taxable interest
• Ordinary dividends
• Taxable refunds, credits, or offsets of state and local income taxes
• Alimony received
• Business income or loss
• Capital gains or losses
• Other gains or losses
• Taxable IRA distributions
• Taxable pensions and annuities
• Rents and royalties
• Farm income or losses
• Unemployment compensation
• Taxable social security benefits
• Other income

Less adjustments to income:

• Educator expenses
• IRA deduction
• Student loan interest deduction
• Tuition and fees deduction
• Archer MSA deduction
• Moving expenses
• One-half of self-employment tax
• Self-employed health insurance deduction
• Self-employed SEP, SIMPLE, and qualified plans
• Penalty on early withdrawal of savings
• Alimony paid

Equals Adjusted Gross Income

You may know whether you are eligible for the Earned Income Credit based on whether you were eligible last year. If your situation has not changed substantially, you will probably be eligible again this year.

Your estimated refund can be an approximation, and you may also be able to use last year’s return as a basis for estimating. If you are aware of changes this past year that will directly affect your refund, take them into consideration.

After answering the questions under “Guide Me To A Service,” you will be taken to a screen showing the companies for which you are eligible to free file.

Preparing your return

The last step is to select a company, go to its website by clicking on its name, and proceed to prepare and e-file your federal income tax return. The company’s tax preparation and filing software will guide you through the process. You should have all the necessary information on hand, just as if you were preparing your return on paper. Normally the software allows you to save your progress if you are not able to complete your return in one session.

Submitting your return

Once you have entered all your information, the software will do a check for accuracy and consistency, will let you know of any discrepancies or missing information. Once the return is complete and passes the software’s checks, you will be asked if you are ready to submit the return. You will need to enter your PIN (see below) as your electronic signature. On a joint return, both spouses need to sign using their PIN’s. You will be given the chance to print out the return or save it for your records.

The company's software will then transmit your return to the IRS using the established e-file system. An acknowledgement file will be sent by e-mail, notifying you when your return has been received and accepted.

Electronic Signatures

When you file electronically, you can sign your return using a Personal Identification Number (PIN). This is a five-digit number (any numeric characters except 00000) that you select yourself as part of the process of filing your return through one of the Free File tax software companies. The software will guide you through the process to set up your PIN.

This self-select PIN method eliminates the requirement to send in Form 8453 - U.S. Individual Income Tax Declaration for an IRS e-file Return, or Form 8453-OL - U.S. Individual Income Tax Declaration for an IRS e-file Online Return. You can use your PIN whether your are filing from your own computer or are having a tax professional prepare your return for you.

There are some taxpayers who are not eligible to use a Self-Select PIN:

• Primary taxpayers under age 16 who have never filed a return.
• Secondary taxpayers (spouse) under age 16 who did not file in the immediate prior year.
• Taxpayers who filed Forms 1040-NR or 1040-SS for the previous tax year.
• Taxpayers who are required to file the following forms. These forms would have to be sent in, attached to Form 8453 – U.S. Individual Income Tax Declaration for an IRS e-file Return, or Form 8453-OL – Individual Income Tax Declaration for an IRS e-file Online Return.
• Form 3115 – Application for Change in Accounting Method
• Form 3468 - Computation of Investment Credit
• Form 5713 - International Boycott Report
• Form 8283 - Non-Cash Charitable Contributions
• Form 8332 - Release of Claim to Exemption for Children of Divorced or Separated Parents
• Form 8858 - Information Return of U.S. Persons with Respect to Foreign Disregarded Entities, and
• Form 8885 – Health Coverage Tax Credit

If you are not eligible, or choose not to sign electronically, you must complete, sign and send in Form 8453 or Form 8453-OL, whichever applies.

AGI for Purposes of Self-Select PIN

Once you set up a PIN you can continue to use it from one year to the next, or you can establish a new PIN.

When you set up your PIN, you will need to enter your date of birth and your Adjusted Gross Income (AGI) from last year’s tax return, as it was originally filed. Since this data is used to identify you, there are some specific rules to follow in reporting last year’s AGI.

• If the IRS corrected your return, or you later submitted an amended return, the AGI you need for purposes of the self-select PIN is the AGI on your original return for last year, even if it was incorrect.
• If this is the first time you are filing, you should enter zero ("0") for your AGI, rather than leave it blank.
• If you changed from filing single last year to married filing jointly this year, each taxpayer should use their individual original AGI from their respective returns from last year.
• If you changed from married filing jointly to married filing separately or single this year, each taxpayer should use the same original full AGI from last year’s joint return.
• If you filed a joint return with a different spouse last year, you should use the original full AGI from the joint return filed with your ex-spouse last year.
• If you filed a joint return last year but only one spouse had all the income, both spouses should use the same original full AGI from the joint return filed last year.

Following Up On Your Refund

Once you have successfully filed your return electronically, if you are due a refund, you can follow up on the status of your refund by going to the IRS website and clicking on "Where’s My Refund?"