If You File Taxes Using TurboTax, You Could Be Seriously Overpaying
If you've been using TurboTax to file your tax returns, you may be paying more than you need to.
Tax Day is April 17, so if you haven't done your taxes and don't plan to file for an extension (which only takes a few minutes), now is the time to figure out if you qualify to file for free.
The IRS website lists almost a dozen different tax-filing software programs that may allow you to file your federal and state tax returns for free if your adjusted gross income is at or below a certain level. Big-name participants include TurboTax and H&R Block, as well as several less prominent brands.
Most of the tax programs have an income threshold of around $60,000 to $66,000. Although some have additional restrictions around age or state of residence, in many cases you can file both your federal and state returns for no charge using the tax software services listed.
TurboTax, however, is an outlier. You can still file a free federal tax return with TurboTax through the IRS Free File program, but only if your adjusted gross income is $33,000 or less annually. That's about half the upper income limit of most of the other free tax-filing options.
Even the tax software with the second-lowest AGI threshold, FreeTaxUSA, has an upper limit of $51,000—still $18,000 higher than the TurboTax income limit.
TurboTax's parent company, Intuit, did not immediately respond to a request that it explain the wide variance, although it did point out that the free-filing upper limit is $66,000 for active military personnel.
Millions of people could be affected by the gap between the different free-filing thresholds. According to IRS data, roughly 26 million U.S. tax returns showed adjusted gross income between $30,000 and $49,999 for the 2015 tax year. (Another 20 million had AGI of at least $50,000 but less than $75,000; it seems reasonable that many of those could also be affected by the gap.)
There's one other way to file your taxes for free with TurboTax: If you're filing a 1040EZ or 1040A form, you can use the TurboTax Free Edition, even though it's not part of the IRS Free File program. Those forms won't work for any taxpayers who have even slightly complex tax situations, however—those who want to claim deductions for charitable gifts or mortgage interest, or health savings account contributions, for instance.