With tax season starting on January 27, investors might be pleased to learn they have more free filing options than before.
Investors typically need specific tax forms to complete their returns. These include Form 1099-B for reporting capital gains and losses, Form 1099-DIV for dividends, and Form 1099-INT for interest income from various sources like savings accounts and Treasury bills. Retirees might also require Form 1099-R to report withdrawals from retirement plans such as 401(k)s or IRAs.
Let’s take a look at three free options available for filing your taxes this year, each suiting different situations.
### 1. IRS Direct File
The IRS Direct File program is expanding its reach this year, covering 25 states and supporting over 30 million taxpayers based on estimates from the U.S. Department of the Treasury.
Former IRS Commissioner Danny Werfel expressed enthusiasm about the program’s enhancements: “We’re excited about the improvements to Direct File and the millions more taxpayers who will be eligible to use the service this year,” he said in a press release last October.
During its initial rollout in 2024, the program was limited to simple returns, accepting those with interest income of $1,500 or less. For the 2025 tax season, it will include interest above $1,500 and consider Alaska residents receiving the Permanent Fund dividend. However, it doesn’t accommodate other investment income like capital gains and dividends just yet.
Starting in March, Direct File will also accommodate most company retirement plan distributions, including 401(k) plans and pensions. But if you’ve made withdrawals from an IRA, this service isn’t an option for you.
### 2. IRS Free File
IRS Free File is another avenue to consider, a collaborative effort with the Free File Alliance, which includes various tax software companies.
To access IRS Free File in 2024, your adjusted gross income (AGI) should be $84,000 or less. Tim Hugo, executive director of the Free File Alliance, mentions that eight software partners will handle the most widely used tax forms and schedules. This includes Schedule B for interest and dividends and Schedule D for capital gains and losses, as well as investing forms like 1099-INT over $1,500 and certain items from Forms 1099-B and 1099-DIV.
Hugo emphasizes the program’s potential: “It really is a great tool that can serve millions of Americans that just nobody knows about,” he remarked.
### 3. Volunteer Income Tax Assistance
For those seeking more personalized help, the Volunteer Income Tax Assistance (VITA) program, managed by the IRS, might be a good fit.
For the 2025 tax season, if your AGI is $67,000 or less, you can qualify for VITA. The program provides support for some investor-specific forms, such as 1099-INT, 1099-B, and 1099-DIV, though with certain limitations. It also assists with retirement income forms like 1099-R, albeit with some exclusions. However, note that cryptocurrency transactions for the 2024 filings won’t be covered by VITA.
These options can provide much-needed assistance, making tax season a little less daunting.
