Roughly 70% of Taxpayers Are Eligible for IRS Free File, But Only 2% Used It in 2022

AsiaVision | E+ | Getty Images
  • If your adjusted gross income was $73,000 or less in 2022, you can file your federal taxes for free with IRS Free File.
  • Roughly 70% of taxpayers qualify for the service, but only 2% used it during the 2022 filing season, according to the National Taxpayer Advocate.
  • While partners offer the most commonly used tax forms and schedules, Free File won't work for all filers.

Most Americans can file their taxes for free — but many don't seize the opportunity.

Roughly 70% of taxpayers qualify to use IRS Free File, but only 2% used it during the 2022 filing season, according to the National Taxpayer Advocate's annual report to Congress.

A public-private partnership between the IRS and the Free File Alliance, the service offers free online guided tax preparation from partner companies for federal returns (and some state filings). You may qualify if your 2022 adjusted gross income was $73,000 or less.

How Free File works

To get started with Free File, you'll need last year's adjusted gross income for verification, your Social Security number and the necessary tax forms.

You can browse providers from the IRS website or use the agency's lookup tool to find the best tax software match, based on your location, income and other factors.

The second page of the lookup tool estimates your adjusted gross income, which is your gross earnings minus pretax 401(k) deferrals, student loan interest, certain pretax individual retirement account deposits, health savings account contributions and more.

"It's a good option for those who have simple returns, don't need on-going tax planning advice and could benefit financially from the free service," said certified financial planner Judy Brown at SC&H Group in the Washington and Baltimore area. She is also a certified public accountant.

However, there have been several tax law changes over the past few years, broadly affecting taxpayers — such as retirees, student loan borrowers and more — which may make filing on your own more challenging, she said. 

"Tax planning isn't just about filing a return each year, it is about proactively implementing a tax savings strategy over many years," Brown added. 

If your adjusted gross income is above $73,000, there's an option to use Free File Fillable Forms, with limited built-in calculations but no guidance.

Free File may not work for all taxpayers

While Free File isn't widely used, some experts say it won't work for more complicated returns.  

"Some eligible taxpayers, due to their specific tax situations, may discover that no Free File offering contains the forms or schedules they require, and those taxpayers have no choice but to pay to e-file, redo their returns in Free File Fillable Forms or paper file," National Taxpayer Advocate Erin Collins wrote in her recent report.

Tim Hugo, executive director of the Free File Alliance, said partner companies offer a "core list" of the most commonly used federal income tax forms and schedules, outlined on the IRS website here. However, companies may not support some of the "less commonly used" forms, according to the website.

"The complicated returns are on the higher end," he said. "For [filers earning] $73,000, we just don't get any complaints." 

Copyright CNBC
Contact Us