Tax Filing Software

Often yes. The IRS Free File Alliance offers free guided software to taxpayers below an income threshold (2025 AGI of $89,000 or less for 2026 filing). The separate IRS Direct File program is suspended for the 2026 filing season with no relaunch date set. Several commercial products (FreeTaxUSA, Cash App Taxes) also offer genuinely free federal filing for simple returns, though they may charge once you add state returns or more complex forms. Eligibility and exact offerings change each year, so check current details at irs.gov before filing.

Match the product to your return's complexity. W-2-only filers taking the standard deduction can usually use free or low-cost value-tier software. Self-employment income, rental property, investment sales, K-1s, or multi-state returns push you toward higher tiers with more form support and guidance. Other factors include audit-support options, the cost of state filing, and import features. Comparing the all-in price for your specific forms is the most reliable approach.

Software handles most straightforward returns well, but a CPA or enrolled agent can add value for complex situations — significant self-employment or business income, major life or financial changes, multiple income types, equity compensation, or proactive tax planning. A professional can also represent you before the IRS. If your return is simple and you are comfortable with the forms, software is typically sufficient and cheaper. Complex or high-stakes situations favor professional help.

A deduction reduces your taxable income, so its value depends on your tax bracket. A tax credit reduces your tax bill dollar-for-dollar, generally making credits more valuable per dollar than deductions. Some credits are refundable, meaning they can produce a refund beyond what you owe, while others are nonrefundable. Tax software calculates both as you enter information, but understanding the distinction helps you gauge the impact of each.

The IRS generally recommends keeping tax returns and supporting documents for at least three years, which aligns with the typical window for amending a return or for the IRS to audit. Longer retention — six or seven years — is advisable in certain situations, such as significant unreported income or claims for worthless securities. Because the right period depends on your circumstances, confirm specifics at irs.gov or with a tax professional.

If you owe taxes and file or pay late, the IRS can assess failure-to-file and failure-to-pay penalties plus interest, with the failure-to-file penalty typically the larger of the two. Filing on time even when you cannot pay in full usually reduces penalties, and the IRS offers payment plans. If you are owed a refund, there is generally no penalty for filing late, but you must file within a limited window to claim it. See irs.gov for current rules.