Data: Taxpayers Missing Out on Chance to File for Free
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Free File is a program that allows the majority of taxpayers to file their federal income tax returns for free through participating software companies. But the service remains woefully underused.
Despite 70% of taxpayers qualifying for Free File, less than 1.9% used the service in fiscal year 2023, the most recent year for which this IRS data is available, according to NerdWallet analysis. This marks a shortfall of roughly 101 million income tax filers who may have missed the opportunity to file their federal income tax returns for free that year.
Looking at the past 10 years of IRS data, Free File usage has only dipped below 2% in one year, 2017. On average, 2.3% of filers have used the service each year over the past decade and 2.2% in the previous fiscal year (2022).
Last tax season, the IRS piloted another free tax filing option: Direct File. This year, that program is available in more states and will likely impact Free File usage. For taxpayers, it opens additional opportunities to file a federal tax return at no cost. These two programs and other filing options all feature different qualification standards and potential benefits.
Note: Despite recent confusion surrounding the availability of Direct File, both this and Free File remain online and accepting federal tax filings.
Free File: What you should know
The Free File program is essentially an agreement between the IRS and private tax software companies, known collectively as Free File Inc., formerly known as the Free File Alliance. Companies within this alliance offer taxpayers the opportunity to file their federal returns at no cost if they meet certain requirements. Each year, the income standards are set to ensure that 70% of federal taxpayers qualify for the program.
For the current tax filing season, filers who had an adjusted gross income of $84,000 or less in 2024 qualify for the program. Tax software providers in the program may have additional stipulations, however, and not all offer state income tax return filing. The IRS Free File search tool can help taxpayers determine if they qualify and send them to the appropriate software websites.
Direct File may also be available in your state
The newer IRS Direct File program bypasses the use of private software providers altogether, allowing taxpayers to file their federal returns directly with the government agency. The program is free, but currently only available in 25 states.
The income limits are $200,000 or less for single filers with one employer or $168,600 or less for those with multiple employers. For married couples filing jointly, combined wages must be $250,000 or less, and neither spouse can exceed the single filer thresholds on their own. For those married filing separately, the threshold is $125,000 or less.
Because Direct File doesn’t support itemized deductions and many IRS forms, it is most appropriate for people with simple returns. The service doesn’t support state filing, so it will direct you to your state’s free filing tool once your federal return is complete.
Beware of “free” tax software
No one wants to pay for things they can get for free, but taxpayers should be cautious when looking into various free filing options. Both Free File and Direct File are reputable choices for those who qualify, but some tax software providers offer “free versions” that aren’t necessarily governed by the same rules.
To ensure you’re taking advantage of the official programs, access them through IRS.gov. And if you don’t qualify for Free File or Direct File, read carefully about what’s included in the tax software program you sign up to use. Some additional costs may be warranted — such as those for certain forms — whereas others are entirely optional, such as audit protection or access to a tax professional.
