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Billions Spent on Tax Returns That Could Be Filed for Free
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do not influence our editors’ opinions or ratingsBillions Spent on Tax Returns That Could Be Filed for Free
About 101 million eligible filers missed out on using the Free File program, a NerdWallet data analysis shows.
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Economist & Spokesperson
19 years of experience Expertise Economics Data analysis Personal financeAs NerdWallet’s Senior Economist, Elizabeth Renter spends her time analyzing economic trends and data to help people make more informed decisions about their personal finances. Her work has been cited by The New York Times, The Washington Post, the "Today" show, CNBC and elsewhere. Prior to joining NerdWallet in 2014, she was a freelance journalist. She received a Masters of Science in Finance and Economics from West Texas A&M University, and focused her elective coursework on macroeconomics and analytics. When she’s not at work, Elizabeth enjoys college football, old houses, traveling to old cities and powerlifting. She is based in Durham, North Carolina.
As NerdWallet’s Senior Economist, Elizabeth Renter spends her time analyzing economic trends and data to help people make more informed decisions about their personal finances. Her work has been cited by The New York Times, The Washington Post, the "Today" show, CNBC and elsewhere. Prior to joining NerdWallet in 2014, she was a freelance journalist. She received a Masters of Science in Finance and Economics from West Texas A&M University, and focused her elective coursework on macroeconomics and analytics. When she’s not at work, Elizabeth enjoys college football, old houses, traveling to old cities and powerlifting. She is based in Durham, North Carolina. Published in Economist & Spokesperson + more + more
Lead Assigning Editor
Expertise Personal finance credit scoring debt and money managementKathy Hinson is a former Lead Assigning Editor for the Core Personal Finance team at NerdWallet. Previously, she spent 18 years at The Oregonian in Portland in roles including copy desk chief and team leader for design and editing. Prior experience includes news and copy editing for several Southern California newspapers, including the Los Angeles Times. She earned a bachelor’s degree in journalism and mass communications from the University of Iowa.
Kathy Hinson is a former Lead Assigning Editor for the Core Personal Finance team at NerdWallet. Previously, she spent 18 years at The Oregonian in Portland in roles including copy desk chief and team leader for design and editing. Prior experience includes news and copy editing for several Southern California newspapers, including the Los Angeles Times. She earned a bachelor’s degree in journalism and mass communications from the University of Iowa. Lead Assigning Editor + more + moreThe estimated share of tax filers who took advantage of a free filing program has grown in recent years. Unfortunately, so has the number of those not using it, resulting in billions in unnecessary spending.
The estimated share of tax filers who took advantage of a free filing program has grown in recent years. Unfortunately, so has the number of those not using it, resulting in billions in unnecessary spending. AD Owe $10,000+ or More? This Tax Season Could Be Your Chance to Qualify Each year the IRS writes off millions in tax debt, yet few have applied. Learn moreon Anthem Tax Services' website
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For about 20 years the IRS has partnered with tax software providers, known as the Free File Alliance, to provide free online filing for taxpayers with qualifying incomes. This year, that income is $73,000: Anyone with an adjusted gross income at or below this level for tax year 2022 can file for free using at least one of these providers this year. The income cap is adjusted annually to ensure the lowest earning 70% of taxpayers can file for free online using tax software.
For about 20 years the IRS has partnered with tax software providers, known as the Free File Alliance, to provide free online filing for taxpayers with qualifying incomes. This year, that income is $73,000: Anyone with an adjusted gross income at or below this level for tax year 2022 can file for free using at least one of these providers this year. The income cap is adjusted annually to ensure the lowest earning 70% of taxpayers can file for free online using tax software.One problem with this noble plan: relatively few take advantage.
One problem with this noble plan: relatively few take advantage.2021 data reveals a 101 million shortfall of free filers
2021 data reveals a 101 million shortfall of free filersA look at IRS data from fiscal year 2021 — the most recent available — finds that while 70% of taxpayers qualified for Free File, just 3.1% used it. It's a slim improvement from 2.8% the year before. That represents a shortfall of about 101 million taxpayers — up from 99.5 million in 2020 — paying to file their individual federal returns when they didn’t need to.
A look at IRS data from fiscal year 2021 — the most recent available — finds that while 70% of taxpayers qualified for Free File, just 3.1% used it. It's a slim improvement from 2.8% the year before. That represents a shortfall of about 101 million taxpayers — up from 99.5 million in 2020 — paying to file their individual federal returns when they didn’t need to.Just how much they spent would vary depending on what service they used and their personal tax situations. However, a 2022 NerdWallet survey conducted online by The Harris Poll found that those who paid to file their federal returns typically coughed up over $150. At that rate, 2021 filers may have overpaid to the tune of $15.2 billion.
Just how much they spent would vary depending on what service they used and their personal tax situations. However, a 2022 NerdWallet survey conducted online by The Harris Poll found that those who paid to file their federal returns typically coughed up over $150. At that rate, 2021 filers may have overpaid to the tune of $15.2 billion.Even a more conservative spending estimate at $40 per return — close to what many big-name online tax services advertise — would amass about $4 billion in overspending.
Even a more conservative spending estimate at $40 per return — close to what many big-name online tax services advertise — would amass about $4 billion in overspending.By nature of the Free File program, these taxpayers are the lowest earners in the country. As income tax filing moved from paper returns to online software over the past few decades, the program attempted to ensure these taxpayers had access to helpful programs that would allow them to file more easily and at zero cost.
By nature of the Free File program, these taxpayers are the lowest earners in the country. As income tax filing moved from paper returns to online software over the past few decades, the program attempted to ensure these taxpayers had access to helpful programs that would allow them to file more easily and at zero cost.Lack of awareness and confusion likely to blame
Lack of awareness and confusion likely to blameA 2020 report from the Treasury Inspector General for Tax Administration found that 30% of taxpayers who paid to file were unaware of the Free File program. And you surely have to know about it to use it. But you also have to know how to access it and how to look out for potentially costly traps — and how to look out for potentially costly traps from other providers advertising "free" services.
A 2020 report from the Treasury Inspector General for Tax Administration found that 30% of taxpayers who paid to file were unaware of the Free File program. And you surely have to know about it to use it. But you also have to know how to access it and how to look out for potentially costly traps — and how to look out for potentially costly traps from other providers advertising "free" services.Software provided by companies in the Free File Alliance is governed by strict regulations. But many tax software providers offer free versions of their own software, outside of the Alliance, that isn’t governed by the same rules.
Software provided by companies in the Free File Alliance is governed by strict regulations. But many tax software providers offer free versions of their own software, outside of the Alliance, that isn’t governed by the same rules.Searching Google for “free file taxes” or “free tax file” returns a page of not entirely free results — the first three to five are ads. Providers like TurboTax and H&R Block offer their own “free” tax services, but they have been criticized for misleading consumers into costly upgrades. In fact, a ProPublica investigation into the practice led to tighter Free File Alliance standards in 2020.
Searching Google for “free file taxes” or “free tax file” returns a page of not entirely free results — the first three to five are ads. Providers like TurboTax and H&R Block offer their own “free” tax services, but they have been criticized for misleading consumers into costly upgrades. In fact, a ProPublica investigation into the practice led to tighter Free File Alliance standards in 2020.H&R Block and TurboTax by Intuit subsequently left the Alliance in 2020 and 2021, respectively.
H&R Block and TurboTax by Intuit subsequently left the Alliance in 2020 and 2021, respectively.Taxpayer tips to file for free
Taxpayer tips to file for free1. Know if you qualify. For 2022 income tax returns being filed in 2023, you qualify for free filing if your adjusted gross income is $73,000 or less. And if you’re married and filing jointly, that limit refers to your combined income. Unsure? You can estimate your AGI or begin the Free File process without knowing: The software will notify you early on if you do not qualify.
1. Know if you qualify. Know if you qualify. For 2022 income tax returns being filed in 2023, you qualify for free filing if your adjusted gross income is $73,000 or less. And if you’re married and filing jointly, that limit refers to your combined income. Unsure? You can estimate your AGI or begin the Free File process without knowing: The software will notify you early on if you do not qualify.2. Access the tax software through IRS.gov. Rather than using a search engine, ensure you’re getting to an actual Free File page by accessing the filing options through the official IRS Free File website. Participating tax companies may have additional restrictions — on age and location, for example — but the Lookup Tool will narrow down your options by asking a few questions.
2. Access the tax software through IRS.gov. Access the tax software through IRS.gov. Rather than using a search engine, ensure you’re getting to an actual Free File page by accessing the filing options through the official IRS Free File website . Participating tax companies may have additional restrictions — on age and location, for example — but the Lookup Tool will narrow down your options by asking a few questions.3. Be wary of suggested charges. No matter how you file, read all instructions carefully. Providers outside of the Free File Alliance offer add-ons like audit protection or one-on-one advising for additional fees. Know what you’re signing up for and get help if you’re unsure.
3. Be wary of suggested charges. Be wary of suggested charges. No matter how you file, read all instructions carefully. Providers outside of the Free File Alliance offer add-ons like audit protection or one-on-one advising for additional fees. Know what you’re signing up for and get help if you’re unsure.4. Get help. In addition to the help provided by tax software companies, you can seek support directly from the IRS. The agency has Taxpayer Assistance Centers around the country to assist with filing and tax questions. People with additional needs, such as older or disabled adults, or those who speak limited English, may qualify for the Volunteer Income Tax Assistance program, or VITA.
4. Get help. Get help. In addition to the help provided by tax software companies, you can seek support directly from the IRS. The agency has Taxpayer Assistance Centers around the country to assist with filing and tax questions. People with additional needs, such as older or disabled adults, or those who speak limited English, may qualify for the Volunteer Income Tax Assistance program , or VITA. METHODOLOGYThe number of Americans who qualify to use IRS Free File but do not was determined using the 2021 IRS Data Book to determine the number of individual returns filed in the Oct. 1, 2020, through Sept. 30, 2021, fiscal year, and the difference between 70% of those returns and the sum of those who used Free File. While the 70% guideline applies to the share of filers who should be able to use Free File in a filing year, the fiscal year data is a proxy for these more precise (but unavailable) numbers.
The number of Americans who qualify to use IRS Free File but do not was determined using the 2021 IRS Data Book to determine the number of individual returns filed in the Oct. 1, 2020, through Sept. 30, 2021, fiscal year, and the difference between 70% of those returns and the sum of those who used Free File. While the 70% guideline applies to the share of filers who should be able to use Free File in a filing year, the fiscal year data is a proxy for these more precise (but unavailable) numbers.The median amount spent in a single year on federal tax filing does not include those who didn’t file in 2021 or those who didn’t pay to file in 2021. This figure is based on findings from a survey conducted online within the United States by The Harris Poll on behalf of NerdWallet Feb. 22-24, 2022, among 2,077 U.S. adults ages 18 and older, among whom 1,025 paid to file 2021 federal income taxes. Read our analysis for additional methodology details on this survey.
The median amount spent in a single year on federal tax filing does not include those who didn’t file in 2021 or those who didn’t pay to file in 2021. This figure is based on findings from a survey conducted online within the United States by The Harris Poll on behalf of NerdWallet Feb. 22-24, 2022, among 2,077 U.S. adults ages 18 and older, among whom 1,025 paid to file 2021 federal income taxes. Read our analysis for additional methodology details on this survey. About the author Elizabeth Renter Elizabeth Renter Elizabeth Renter's work as NerdWallet’s Senior Economist has been cited by The New York Times, The Washington Post, CNBC and elsewhere. See full bio.Helpful resources
Helpful resources How Federal Tax Brackets and Rates Work Capital Gains Tax: Long and Short-Term Rates for 2025-2026 How to Fill Out Your W-4 Form and When to Adjust It More like this Taxes 2026 Tax Brackets and Federal Income Tax Rates The IRS adjusts the federal tax brackets annually to keep pace with inflation. The 2026 tax brackets apply to taxes filed in 2027. Bella Avila Standard Deduction for 2025 and 2026: Amounts, When to Take The standard deduction is a popular way for taxpayers to reduce their taxable income. Your deduction amount depends on your age, filing status and other factors. 2 By Sabrina Parys, Tina Orem Capital Gains Tax: Long and Short-Term Rates for 2025-2026 Capital gains are the profits from the sale of assets. They can be subject to short-term or long-term tax rates. 2 By Sabrina Parys, Tina Orem 25 Popular Tax Deductions and Tax Breaks for 2025-2026 A deduction cuts the income you're taxed on, which can mean a lower bill. A credit cuts your tax bill directly. Learn more about common tax breaks and write-offs — and how to claim them. 2 By Sabrina Parys, Tina Orem Federal Income Tax Calculator and Refund Estimator 2025-2026 Estimate your 2026 tax refund or bill using our free income tax calculator. Enter your income, age and filing status to get started. Sabrina Parys How Federal Tax Brackets and Rates Work Contrary to popular belief, your income isn't taxed at just one rate. The U.S. has a progressive tax system, meaning different portions of your income get taxed at different rates. 2 By Sabrina Parys, Tina Orem 2025 Tax Brackets and Federal Income Tax Rates The 2025 federal income tax rates range from 10% to 37% and apply to taxes due by April of this year. Find out which bracket you're in. Bella Avila 2026 Tax Brackets and Federal Income Tax Rates The IRS adjusts the federal tax brackets annually to keep pace with inflation. The 2026 tax brackets apply to taxes filed in 2027. Bella Avila Standard Deduction for 2025 and 2026: Amounts, When to Take The standard deduction is a popular way for taxpayers to reduce their taxable income. Your deduction amount depends on your age, filing status and other factors. 2 By Sabrina Parys, Tina Orem Capital Gains Tax: Long and Short-Term Rates for 2025-2026 Capital gains are the profits from the sale of assets. They can be subject to short-term or long-term tax rates. 2 By Sabrina Parys, Tina Orem 25 Popular Tax Deductions and Tax Breaks for 2025-2026 A deduction cuts the income you're taxed on, which can mean a lower bill. A credit cuts your tax bill directly. Learn more about common tax breaks and write-offs — and how to claim them. 2 By Sabrina Parys, Tina Orem Federal Income Tax Calculator and Refund Estimator 2025-2026 Estimate your 2026 tax refund or bill using our free income tax calculator. Enter your income, age and filing status to get started. Sabrina Parys How Federal Tax Brackets and Rates Work Contrary to popular belief, your income isn't taxed at just one rate. The U.S. has a progressive tax system, meaning different portions of your income get taxed at different rates. 2 By Sabrina Parys, Tina Orem 2025 Tax Brackets and Federal Income Tax Rates The 2025 federal income tax rates range from 10% to 37% and apply to taxes due by April of this year. Find out which bracket you're in. Bella Avila 2026 Tax Brackets and Federal Income Tax Rates The IRS adjusts the federal tax brackets annually to keep pace with inflation. The 2026 tax brackets apply to taxes filed in 2027. Bella Avila Standard Deduction for 2025 and 2026: Amounts, When to Take The standard deduction is a popular way for taxpayers to reduce their taxable income. Your deduction amount depends on your age, filing status and other factors. 2 By Sabrina Parys, Tina Orem Capital Gains Tax: Long and Short-Term Rates for 2025-2026 Capital gains are the profits from the sale of assets. They can be subject to short-term or long-term tax rates. 2 By Sabrina Parys, Tina Orem 25 Popular Tax Deductions and Tax Breaks for 2025-2026 A deduction cuts the income you're taxed on, which can mean a lower bill. A credit cuts your tax bill directly. Learn more about common tax breaks and write-offs — and how to claim them. 2 By Sabrina Parys, Tina Orem