Tax Season!
For those of us in the US, it’s time to start thinking about taxes. It’s painful to pay taxes, but, as we’ll discover, at least you can file your taxes for free!
'Death, taxes and childbirth! There's never any convenient time for any of them.' -- Gone with the Wind Click To TweetIt is a very good idea to know why you owe what you owe in taxes. Once you do, you can start finding legitimate ways to owe less. Which means it is well worth your time to prepare your own taxes. Not only will it be cheaper, you’ll soon find that you can save hundreds or thousands of dollars a year in taxes. If you’re old school, you can use the paper forms from the IRS website. But most of us will use tax prep software like TurboTax.
The Great Rigging
It can feel like the game is rigged. And sometimes it is.
Imagine a world where the IRS offers government-sponsored tax preparation. After all, your employer, bank, and other financial institutions already send all your information to them. Why don’t they offer you a set of completed tax forms and ask if you approve them as-is, or if you’d like instead send in your
For the few who have exotic investments, own your own business or some other complication, or are just plain an anti-government conspiracy sort, you could do all the paperwork we all do now.
Why don’t we live in that world?
Other countries do this. For many years Joseph Bankman, a law professor at Stanford, has led the charge to bring this to the US. He’s been stymied at every turn. By whom? By the multi-billion dollar Tax Industry Complex. H & R Block, TurboTax, and all the rest have lobbied furiously to protect their lucrative business. Planet Money has a great podcast episode about Bankman’s quixotic fight.
For the past twenty years, there has been an agreement between the IRS and tax software industry that they would provide free tax preparation for lower-income folks and the IRS would stay out of the tax prep business. In the typical Orwellian speak of government and business, this agreement is called the Free File agreement.
In 2020, if you earn less than $69,000 per year it is completely free to prepare and file your taxes for free. If you didn’t know this, that’s because the tax prep companies worked really hard to keep it a secret. TurboTax deliberately hid
Thanks to ProPublica’s expose and some measure of shame, you can now find the Free File version of tax prep software if you search online. Let me save you the trouble.
Free Tax Filing!
The details of your situation (e.g.which state you live in) may affect which Free File partners you are eligible to use. But with a little research, you can save yourself some bucks. I recommend you use the IRS tool to find software which lets you file your federal and state taxes for free:
If you make less than $69k/year, Google for 'IRS Free File' to find how to file your taxes at absolutely no cost! tell a friendDo your good deed for the day: let friends know they can file their taxes for free!
Who Do I Use and Recommend?
There is a dizzying array of tax prep software options. Which to choose? For years I’ve used and been happy with TurboTax. One word of warning: TurboTax and all the rest will try to upsell you, but just say no to the stuff you don’t need.
According to the TurboTax folks: “This year, taxpayers with an adjusted gross income of $36,000 or less, military personnel (including the National Guard and reserves) with adjusted gross income of $69,000 or less, or those who qualify for the Earned Income Tax Credit can prepare and file their federal and state tax returns for free with the IRS Free File program delivered by TurboTax.”
To reach the Free File version of
For the rest of us, you’ll have to use the paid version of TurboTax. Fortunately, I’ve negotiated a discount for members of the DoW community! Just click the link below. But you’ll have to hurry, the discount is only until February 17th! After that you can still use the link, but the discount may not still be available.
Personal Finance for PhDs
The other good news is that Emily at Personal Finance for PhDs offers great tax resources for grad students. Depending on if you have a salary from your University, a research assistantship from a research grant, a government fellowship, or something else, graduate student taxes can be complicated. I suggest you check out Emily’s Tax Center for grad students for helpful information for finding your way through the thicket which is US tax law.
Image from the Met Museum