If you don't qualify for IRS' Free File, you can still file for free
— -- Most of us don't have enough stamina to do anything for 26 hours, even if we're enjoying ourselves.
Yet that's the amount of time the average taxpayer spends on federal Form 1040, according to the IRS taxpayer advocate.
Twenty-six hours and 40 minutes to be exact, and that doesn't include state tax returns.
You can, of course, pay someone to do your taxes, but these days, many taxpayers are looking for ways to cut costs.
So here's an alternative: Prepare and file your own taxes, using tax preparation software. While you can spend more than $80 on a software package, there are a variety of ways to prepare and file your taxes electronically for free.
That's a welcome development, because the only thing that annoys Americans more than paying their taxes is paying to file their taxes.
This year's no-cost options include:
•IRS Free File. This partnership between the IRS and private tax preparation companies is designed to encourage more taxpayers to e-file their tax returns. This year, the program is open to all taxpayers with adjusted gross income of $56,000 or less on their 2008 tax returns. The income threshold applies to married and single taxpayers.
To use Free File, go to www.irs.gov.
Each of the Free File programs has its own eligibility requirements. Some are only available to residents of certain states, for example, or are limited to taxpayers who are 50 or younger. Some have a lower income limit than the $56,000 threshold. All of the programs offer free tax preparation and e-filing for one federal tax return.
Some Free File programs include free state tax preparation, but others charge a fee for your state return, says David Williams, electronic tax administration director for the IRS. "We understand the frustration of taxpayers who think they can do both," he says.
State tax officials are frustrated, too. Like the IRS, they're trying to encourage taxpayers to file their tax returns electronically.
"We've been trying to get people to learn they need to find an offer that also includes a free state (return) in their state, because the offers are all different," says Veranda Smith, government affairs associate for the Federation of Tax Administrators, an association for state tax authorities.
If you're not eligible for one of the Free File programs that includes a free state return, you still have options. Twenty-six states allow you to prepare and e-file your tax return on their websites. Some states provide electronic versions of their paper tax forms, while others offer some tax preparation guidance, Smith says. You can check your state's offerings at www.taxadmin.org.
•Free File Fillable. For the first time, taxpayers who don't want to pay to prepare or e-file their taxes have an alternative to paper: electronic versions of their tax returns. This program is available to all taxpayers, regardless of income.
The electronic forms will do the math for you, but that's it. For example, you won't get help figuring out whether you should itemize or take the standard deduction. The program is "designed for people who are comfortable with the tax law and know which forms and instructions they need," Williams says.
Here's what the IRS says about it.
No need for loans
If you file your returns electronically and arrange for direct deposit of your refund, you can get your money in eight to 10 days, Williams says. Taxpayers who file on paper typically get their refunds in four to six weeks.
That makes e-filing a much better choice for cash-strapped taxpayers than a refund-anticipation loan, says Jean Ann Fox, director of consumer protection for the Consumer Federation of America.
Tax preparation companies promote refund-anticipation loans as a way to get your refund quickly. In some cases, though, the interest rate tops 700%. And if the IRS denies some of your deductions or credits, resulting in a refund that's smaller than your loan, you'll still have to repay all of the money you borrowed, Fox says.
Sales of refund-anticipation loans have declined in recent years, Fox says, reflecting greater consumer awareness about the costs and risks. But consumer groups worry that the economic downturn could revive interest in these products.
But even if you're having trouble paying your bills, there's no reason to borrow against your refund, Fox says.
Her advice: "File electronically, get your refund directly deposited into your bank account and get all you have coming to you."
Sandra Block covers personal finance for USA TODAY. Her Your Money column appears Tuesdays. Click here for an index of Your Money columns. E-mail her at: sblock@usatoday.com.