Servicemembers: Tax Info & FAQs

The IRS Free File program offers free federal tax return preparation and e-filing services to taxpayers who meet certain income requirements. For tax year 2023, taxpayers who made $79,000 or less qualified for the program (i.e., approximately 104 million taxpayers). Background In 2003, the IRS launched the Free File program to provide free online federal tax preparation and e-filing services to 70% of the taxpaying population (i.e., approximately 100 million taxpayers). The program is made possible through a public-private partnership between the IRS and the Free File Alliance---a group of industry-leading private-sector tax preparation companies. Notably, in addition to the income threshold cap ($79,000 in 2023), each Free File Alliance member sets its own, unique eligibility criteria. To review a list of each member's criteria, see MyTaxRights's Free File Alliance Eligibility List. You may also use the IRS’s Free File Online Lookup Tool to quickly find a qualifying Free File offer. Some members also offer free state tax return preparation software. Note: Although Free File Alliance members must meet the IRS’s standards for security and privacy, the IRS does not endorse any individual Free File Alliance company. While the IRS manages the content of the Free File pages accessible on IRS.gov, it does not retain any taxpayer information entered on the Free File site.

Yes. Your information is protected from any unauthorized access while it is being sent to the IRS. The companies that participate in the Free File program may not disclose or use tax return information for purposes other than tax return preparation without your informed and voluntary consent. These companies are also subject to the Federal Trade Commission Privacy and Safeguards Rules and IRS e-file regulations.

Yes! Most individuals who qualify for the Free File program have common tax siutations and can use one of the available do-it-youself tax software programs to easily prepare and e-file federal tax returns. Please know that you do not need any specialized tax preparation experience or tax law knowledge to use the Free File program. The commercial tax preparation software offered by Free File members meticulously guide you through each relevant section of your tax return, question-by-question. Many taxpayers are able to finish the entire tax preparation process in under 60 minutes using a computer, tablet, or smartphone.

Yes! You can prepare and file your taxes through the Free File program using either a computer, a smartphone. or a tablet. The IRS Free File Lookup Tool provides a quick way for taxpayers to find a Free File member that meets their specific tax situation. For more information, see the IRS's Press Release: Use IRS Free File Software on Smart Phones or Tablets.

You will need: (1) an e-mail address; (2) a copy of your last year's tax return; (3) and any records to support income, deduction, and tax credit amounts. Records include: Receipts to support any expenses used to claim deductions; Wage and earning statements (Forms W-2, W-2G, 1099-R, and 1099-Misc) from all employers; All receipts pertaining to your small business, if applicable; Income receipts from rental, real estate, royalties, partnerships, S corporation, trusts; Interest and dividend statements from banks (Forms 1099); Receipts to support amounts paid to a daycare provider, and the daycare provider's tax identifying number such as their Social Security number or business Employer Identification Number; and Forms 1095-A, B and C, Health Coverage Statements. For more information, see IRS.gov, Free File: What You Need to get Started.

The Free File program only covers federal tax returns. Thus, tax preparation companies may charge fees for state tax returns, although some companies also offer free state tax return services for certain taxpayers. Remember, you are under no obligation to buy any additional products or services offered by a Free File member.

Remember to always print a copy of your return after you successfully e-file it. Every tax return preparation company with the Free File program should offer you the option of either printing or downloading a copy of your completed tax return. If you forget to print a copy of your tax return, you can request a copy of your tax transcript from the IRS by visiting the IRS's Get Transcript page.

Yes. The IRS takes the position that if your tax return preparer makes a mistake on your return that causes you to pay additional tax, interest, or penalties, then YOU are responsible. If this happens to you, contact your return preparer immediately and carefully read over any contract you signed with the preparer. If you are lucky (and the mistake was no fault of yours), the preparer may offer to cover the costs associated with the mistake. Otherwise, consider filling a complaint with the IRS Return Preparer Office. For more information, visit IRS's Make a Complaint About a Tax Return Preparer page. You may also want to consider preparing your own taxes using online tax preparation software. And if you made $79,000 or less in 2023, you may qualify to file your taxes online for free through the IRS Free File program. The online tax preparation software guides you through each relevant section of the return, question-by-question. For simple returns, you can generally complete the process in about an hour from the comfort of your home.

If your Adjusted Gross Income (AGI) was more than $79,000 in 2023, then you do not qualify for the online tax preparation services available under the Free File program. However, you still have the option of using the IRS's Free Fillable Forms service to self-prepare and e-file your federal tax returns. Note, though, you will need to be comfortable with independently preparing your return because you will not have access to the software-assisted service that is otherwise available with the Free File program.

The Volunteer Income Tax Assistance (VITA) program offers free tax assistance to: People who generally make $56,000 or less; Persons with disabilities; and Limited English-speaking taxpayers who need assistance in preparing their own tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals. Find your nearest VITA site by using the IRS's VITA Site Locator Tool. Before going to a VITA site, review IRS Publication 3676-B to gain an understanding of the specific services provided. Also, be sure to check out the IRS's What to Bring page to ensure you have all the required documents and information that the VITA volunteers will need to assist you.

The Tax Counseling for the Elderly (TCE) program offers free tax assistance for all taxpayers, particularly those who are 60 years of age and older, and specializes in questions about pensions and retirement-related issues unique to seniors. The IRS-certified volunteers who provide tax counseling are often retired individuals associated with non-profit organizations that receive grants from the IRS. Before going to a TCE site, review IRS Publication 3676-B to gain an understanding of the specific services provided. Also, be sure to check out the IRS's What to Bring page to ensure you have all the required documents and information that the TCE volunteers will need to assist you. TCE sites are generally located at community and neighborhood centers, libraries, schools, shopping malls, and other convenient locations across the country. To locate your nearest TCE site, use the IRS's TCE Locator Tool or call 800-906-9887. When looking for a TCE site, keep in mind that a majority of the TCE sites are operated by the AARP Foundation’s Tax Aide program. To locate the nearest AARP TCE Tax-Aide site, use the AARP Site Locator Tool or call 888-227-7669.

A Low Income Taxpayer Clinic (LITC) is an organization that receives a matching grant from the IRS to represent low income individuals who have a tax dispute with the IRS, and to provide education and outreach to individuals who speak English as a second language (ESL). Qualified organizations include, among others, academic institutions and nonprofit organizations throughout the U.S. that meet the goals of the program. LITC services are free or low cost for eligible taxpayers. Although LITCs receive partial funding from the IRS, the clinics, their employees, and their volunteers are completely independent of the IRS. You can find the location of the LITC nearest you by using the LITC Map Tool on the Taxpayer Advocate site. The city for the main office of each clinic is listed; however, some clinics have multiple locations. Please contact the clinic for the office nearest you. Note, each clinic determines whether prospective clients meet income guidelines and other criteria before agreeing to represent them or provide consultation services. If you have questions about the LITC Program or grant application process, please contact the LITC Program Office at 202-317-4700 (not a toll-free call) or by email at LITCProgramOffice@irs.gov.

An assessment is simply the recording of a tax liability. The IRS makes a tax assessment by recording the taxpayer’s name, address, and tax liability. Before assessing any additional income tax, the IRS must send the taxpayer a notice of deficiency at his or her last known address. The notice of deficiency is a legal determination that is presumptively correct and consists of the following: (a) A letter explaining the purpose of the notice, the amount of the deficiency, and the taxpayer's options; (b) A waiver to allow the taxpayer to agree to the additional tax liability; (c) A statement showing how the deficiency was computed; and (d) An explanation of the adjustments. Taxpayers have 90 days from the date of the notice of deficiency (150 days if residing outside the U.S.) to file a petition in Tax Court to dispute the proposed tax assessments.

3 years – Generally, the IRS must assess taxes within 3 years from the date you file your return or the return due date, whichever is later. For most taxpayers, this means that IRS must assess taxes within 3 years of the return due date (April 15th). If you self-report owing taxes upon filing a return, the assessment is complete once the IRS accepts your return and nothing more needs to be done by the IRS (unless there is an issue with your return). The 3-year time limit generally encompasses the time in which the IRS can audit your return and propose any additions to tax. For example, if you filed your 2021 tax return on March 1, 2022, but inadvertently omitted $2,000 of your income, the IRS would generally have until April 15, 2025 (3 years after April 15, 2022---the due date of your 2019 tax return) to complete an audit of your return and assess any additions to tax based on the omission. No limit – The IRS does not have a time limitation to assess a tax when you file a fraudulent return or when you do not file a return. 6 years – If you do not report income that should have been reported on your return (and the additional income is more than 25% of the gross income shown on your filed return), then the IRS has 6 years from the date you filed your return to assess additions to tax.

3 years – You generally have 3 years from the date you filed your original tax return to file a claim for a tax credit or refund. If, however, you paid the tax, you then only have 2 years from the date you paid the tax to file a claim for a tax credit or refund. 7 years – If you are seeking a tax refund related to a bad debt deduction or a loss from worthless securities, then the deadline to file your refund claim is 7 years from the return due date.

Before assessing any additional income tax, the IRS must send the taxpayer a notice of deficiency at his or her last known address. The notice of deficiency is a legal determination that is presumptively correct and consists of the following: (a) A letter explaining the purpose of the notice, the amount of the deficiency, and the taxpayer's options; (b) A waiver to allow the taxpayer to agree to the additional tax liability; (c) A statement showing how the deficiency was computed; and (d) An explanation of the adjustments. Taxpayers have 90 days from the date of the notice of deficiency (150 days if residing outside the U.S.) to file a petition in Tax Court to dispute the proposed tax assessments.

You can get an automatic 6-month extension if you file IRS Form 4868 (Application for Automatic Extension of Time) on or before the due date of your return. The due date of your tax return is generally April 15th. Note, though, an automatic 6-month extension to file does not extend the time to pay your tax. If you do not pay your tax by the original due date of your return, you will owe interest on the unpaid tax and may owe penalties. Special Considerations If you are a U.S. citizen or resident alien, you may qualify for an automatic extension of time to file without filing an IRS Form 4868. You qualify if you meet one of the following conditions on the due date of your tax return: You live outside the United States and Puerto Rico and your main place of business or post of duty is outside the United States and Puerto Rico; or You are in military or naval service on duty outside the United States and Puerto Rico. This automatic extension gives you an extra 2 months to file and pay the tax, but interest will be charged from the original due date of the return on any unpaid tax. You must also include a statement showing that you satisfied one of the above requirements. If you are still unable to file your return by the end of the 2-month period, you can get an additional 4 months if you file an IRS Form 4868 on or before June 15th. This 4-month extension of time to file does not extend the time to pay your tax.

Yes. An Officer-in-Compromise (OIC) allows you to settle your tax debt for less than the fill amount owed. You may want to consider submitting an OIC to the IRS if you are unable to pay your tax liabilities in full (including through a payment plan) or if paying in full would create a financial hardship. The IRS considers a variety of factors when determining whether to accept an OIC, including your: Ability to pay; Income; Expenses; and Total Asset equity. The IRS generally approves an OIC when the amount offered represents the most it can expect to collect within a reasonable period of time. Check out the short IRS information video on OICs for more information: Submitting an OIC You may use the IRS's OIC Pre-Qualifier tool to determine if you meet the initial eligibility requirements and to gather information to prepare a preliminary proposal. Then, if you meet the minimum requirements, review IRS Form 656 (OIC Booklet) for the application and step-by-step instructions to complete it. It is important to be aware of the following items while the IRS reviews and evaluations your OIC: Your non-refundable payments and fees will be applied to the tax liability (you may designate payments to a specific tax year and tax debt); A Notice of Federal Tax Lien may still be filed; Other collection activities are suspended; The legal assessment and collection period for the tax debt(s) is extended; You must make all required payments associated with your offer; You are not required to make payments on an existing installment agreement; and Your offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date. Rejected Offers If the IRS rejects your offer, you have 30 days to appeal the decision using a Form 13711 (Request for Appeal of Offer in Compromise). For more information about the appeals process, see the Additional Assistance page for the IRS Independent Office of Appeals.

Yes (depending on the total value of the assets). Taxpayers with foreign assets may be subject to two separate reporting requirements. One report (Form 8938) is filed along with your federal tax return while the other (FBAR) is reported to the Treasury Department through an online portal. IRS Form 8938 Requirement Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS, generally using IRS Form 8938 (Statement of Specified Foreign Financial Assets) if the aggregate value of the assets exceeds $50,000 (in some cases, the threshold may be higher). The Form 8938 must be attached to the taxpayer’s annual tax return. FBAR Requirement Under the Bank Secrecy Act, you are required to report certain foreign financial accounts (e.g., bank accounts, brokerage accounts, mutual funds, etc.) to the Treasury Department each year and keep certain records of these accounts. You report the accounts by filing a Report of Foreign Bank and Financial Accounts (FBAR) on FinCEN Form 114. Who Must File? A United States person (including a citizen, resident, corporation, partnership, limited liability company, trust and estate) must file an FBAR to report a financial interest in (or signature or other authority over) at least one financial account located outside the United States if the total balance of the person’s foreign financial accounts exceeded $10,000 at any time during the calendar year. A “foreign financial account” is generally defined as an account at a financial institution located outside the United States, regardless of whether the account produced taxable income. The FBAR is an annual report, due April 15th following the calendar year reported. You are allowed an automatic extension to October 15th if you fail to meet the FBAR annual due date of April 15th (you do not need to request an extension). You must file the FBAR electronically through the Financial Crimes Enforcement Network’s BSA E-Filing System (you do not file the FBAR with your federal tax return). ------------------------------------- For more information about the IRS Form 8938 reporting requirements, see the IRS's Do I Need to File a Form 8938 page. For more information about the FBAR reporting requirements, see the IRS’s FBAR informational page. For a side-by-side comparison of the IRS Form 8938 requirement and the FBAR requirement, see the IRS's Comparison page.

It depends. You can exclude a maximum of $250,000 of realized gain ($500,000 if married filing jointly) from the sale of your principal residence. To qualify for the maximum exclusion of gain, you must satisfy all five steps of the Eligibility Test. Eligibility Test, Step 1 - Automatic Disqualification Your home sale is not eligible for the exclusion if ANY of the following are true: You acquired the property through a like-kind exchange (also know as a 1031 exchange), during the past 5 years. For more information, see IRS Publication 544 (Sales and Other Dispositions of Assets); or You are subject to expatriate tax. For more information about expatriate tax, see Chapter 4 of IRS Publication 519 (U.S. Tax Guide for Aliens). Eligibility Test, Step 2 - Ownership Requirement If you owned the home for at least 24 months (2 years) out of the last 5 years leading up to the date of sale (date of the closing), you meet the ownership requirement. For a married couple filing jointly, only one spouse has to meet the ownership requirement. Eligibility Test, Step 3 - Residence Requirement If you owned the home and used it as your residence for at least 24 months of the previous 5 years, you meet the residence requirement. The 24 months of residence can fall anywhere within the 5-year period, and it does not have to be a single block of time. All that is required is a total of 24 months (730 days) of residence during the 5-year period. Unlike the ownership requirement, each spouse must meet the residence requirement individually for a married couple filing jointly to get the full exclusion. If you were ever away from home, you need to determine whether that time counts towards your residence requirement. A vacation or other short absence counts as time you lived at home (even if you rented out your home while you were gone). If you become physically or mentally unable to care for yourself, you only need to show that your home was your residence for 12 months out of the 5 years leading up to the date of sale. In addition, any time you spent living in a care facility (such as a nursing home) counts toward your residence requirement, so long as the facility has a license from a state or other political entity to care for people with your condition. Eligibility Test, Step 4 - Look-Back Requirement If you didn't sell another home during the 2-year period before the date of sale (or, if you did sell another home during this period, but didn't take an exclusion of the gain earned from it), you meet the look-back requirement. You may take the exclusion only once during a 2-year period. Eligibility Test, Step 5 - Exceptions to the Eligibility Test There are some exceptions to the Eligibility Test. If any of the following situations apply to you, click on the associated link to the IRS's page to see if the situation affects your qualification. If none of the following situations apply, and you satisfied all four previous steps, you may claim the maximum exclusion amount. A separation or divorce occurred during the ownership of the home. See the IRS's guide for separated or divorced taxpayers. The death of a spouse occurred during the ownership of the home. See the IRS's guide for widowed taxpayers. The sale involved vacant land. See the IRS's guide for vacant land next to home. You owned a remainder interest, meaning the right to own a home in the future, and you sold that right. See the IRS's guide for remainder interest. Your previous home was destroyed or condemned. See the IRS's guide for home destroyed or condemned—considerations for benefits. You were a service member during the ownership of the home. See the IRS's guide for Service, Intelligence, and Peace Corps personnel. You acquired or are relinquishing the home in a like-kind exchange. See the IRS's guide for like-kind/1031 exchange. Does Your Home Qualify for a Partial Exclusion of Gain? If you do not satisfy all of steps in the Eligibility Test, you may still qualify for a partial exclusion of gain. You can meet the requirements for a partial exclusion if the main reason for your home sale was a change in workplace location, a health issue, or an unforeseeable event. Use Worksheet 1-B contained within IRS Publication 523 to calculate the allowable amount for your partial exclusion of gain.

Yes. In December 2019, Congress passed the SECURE Act, allowing parents to withdraw up to $5,000 from their IRAs or 401(k) plans following the birth or adoption of a child, without paying the 10% early withdrawal penalty.

Social Security and Medicare Taxes According to the IRS, if you paid cash wages of $2,300 or more to a household employee in 2021, you generally must withhold taxes for social security (6.2%) and Medicare (1.45%) from all wages you paid or pay that employee. You are also required to pay your share of social security and Medicare taxes (i.e., 7.65% of cash wages paid). Cash wages include wages paid by check, money order, etc. Do not withhold or pay social security and Medicare taxes from wages you pay to: Your spouse; Your child who is under age 21; Your parent, unless an exception is met; or An employee who is under age 18 at any time during the year, unless performing household work is the employee's principal occupation. If the employee is a student, providing household work is not considered to be his or her principal occupation. Federal Income Tax Withholding Requirement You are not required to withhold federal income tax from wages you pay to a household employee. However, if your employee asks you to withhold federal income tax and you agree, you will need a completed IRS Form W-4 (Employee's Withholding Certificate) from your employee. IRS Form W-2 Requirement If you must withhold and pay social security and Medicare taxes, or if you withhold federal income tax, you will need to complete an IRS Form W-2 (Wage and Tax Statement) for each employee. For more information, see IRS Topic No. 756 (Employment Taxes for Household Employees).

False. Promoters of this scheme incorrectly advise taxpayers who receive wages to file a Form 4852 (Substitute for Form W-2) with the Service and, based on the above theory, include a zero on the line for the amount of wages received. The Internal Revenue Code, however, imposes a federal income tax upon all United States residents and citizens, not just federal employees and those that reside in Washington, D.C., federal territories, and federal enclaves. The Internal Revenue Code also imposes employment tax on all wages paid for employment.

False. All taxpayers who meet minimum income thresholds must file returns and pay any tax owed on their taxable income. No law, including the Internal Revenue Code, permits a taxpayer who has received wages or other taxable income to file a return reporting zero income and zero tax liability. If a taxpayer has received income subject to federal tax, a return showing only zeroes for income and tax liability is not a valid return. Further, inclusion of the phrase “nunc pro tunc” or other legal jargon on an income tax return does not serve to validate an otherwise improper return.

False. A citizen of any one of the 50 States (e.g., New York, California) of the United States or of the District of Columbia, including those living abroad, is also a citizen of the United States and is subject to federal tax. The Internal Revenue Code defines a taxpayer as any person subject to any internal revenue tax and further defines a person as an individual, trust, estate, partnership, association, company, or corporation.

False. A citizen or resident of the United States cannot use an offshore financial arrangement (such as a foreign bank or brokerage account, or a credit card issued by a foreign bank) to avoid his federal tax obligations. Taxpayers are required to disclose foreign financial accounts to the Treasury Department and to report the income earned thereon.

False. A taxpayer who places assets in a trust but retains certain powers over or interests in the assets, including the power to control the beneficial enjoyment of the assets, is treated as the owner of the assets for federal tax purposes and is subject to tax on the income from those assets.

False. Section 6011 of Title 26 of the United States Code expressly authorizes the Service to require, by Treasury regulation, the filing of tax returns. Section 6012 identifies persons who are required to file income tax returns. The Treasury Department has issued regulations requiring taxpayers who meet minimum income thresholds to file income tax returns. Taxpayers also are required to pay any tax owed. Moreover, no provision of the Paperwork Reduction Act serves to exempt taxpayers from the requirement that they file returns.

False. Some people mistake the word "voluntary" for ”optional” – but filing a tax return is not optional for those who meet the law's minimum gross income requirements. The word "voluntary," as used in IRS publications, court decisions, and elsewhere, refers to the fact that the U.S. tax system is a voluntary compliance system. This means only that taxpayers themselves determine the correct amount of tax pursuant to law and complete the appropriate returns, rather than have the government do this for them as is done in some other countries. This system of self-reporting does not make the filing of tax returns or the payment of tax optional. For those who do not comply with this system and fail to self-report their tax liability, the tax law authorizes various enforced compliance measures.

False. No law, including the Internal Revenue Code, permits a taxpayer to avoid or evade tax obligations on the grounds that the taxpayer does not agree with the government’s use of the taxes collected.

It depends. Business expenses, including expenses related to a home-based business, are not deductible unless the expenses relate to a legitimate profit-seeking trade or business. Promoters of home-based business schemes improperly encourage taxpayers to claim household expenses as business expense deductions when the purported home-based business is not a legitimate trade or business.

False. The Sixteenth Amendment to the U.S. Constitution, which authorizes the income tax, was properly ratified by the states and is valid. Further, the argument that the Sixteenth Amendment is invalid due to the lack of an enabling clause is without merit because Congress has the power to lay and collect taxes pursuant to Article 1, Section 8, Clause 18 of the Constitution.