This story was originally published last month. Later Monday in a KELOLAND.com Original, we are looking at other tax changes you need to know for 2020.
SIOUX FALLS, S.D. (KELO) — Tax season is in full swing, but many South Dakotans are paying to file their taxes, despite the fact it should be free.
According to the IRS, 70 percent of taxpayers are eligible to do their taxes for free. However, according to data analyzed by KELOLAND News, not many are taking that option.
We looked at the last several years of data from the IRS and found that in the 2018 federal fiscal year (Oct. 2017-Sept. 2018), only 6,778 returns in South Dakota were filed with the Free File program. Applying the IRS estimate that 70 percent of taxpayers are eligible that would mean nearly 287,000 returns were filed that were eligible. Instead, those people paid or filed by paper.
Early data from the 2019 tax season showed an increase in people using Free File.
Who is eligible and how does it work?
Adjusted Gross Income (AGI), according to the IRS, is defined as gross income minus adjustments to income. Gross income includes your wages, dividends, capital gains, business income, retirement distributions as well as other income. Adjustments to Income include such items as Educator expenses, Student loan interest, Alimony payments or contributions to a retirement account.
TurboTax, H&R Block, Liberty Tax and TaxACT are among the members.
To use IRS Free File, taxpayers need to go to IRS.gov and use a tool to find the company best matched with their tax situation. In addition to the normal documents needed for taxes, people also need an email address and a copy of last year’s tax return.
Once the taxpayers are matched to the service, they can fill out their taxes for free.
Free File is open for the season.
It seems pretty simple. Taxpayers work with the tax service matched to them, fill out their tax return forms and file. There should be zero costs. So, why are not many people taking advantage of the program?
Reports in by non-profit investigative news group ProPublica in 2019 found several issues with Intuit-owned TurboTax and its marketing.
First, the site was advertising “free filing” on their homepage and throughout the site. No matter what happened when ProPublica tried to file taxes, there would be a charge. Sometimes more than $200.
It turns out, you actually cannot go directly to TurboTax.com. Hidden in the support section of the site was a note that it’s impossible to find the actual free version on TurboTax’s site. Instead, people were supposed to go to TaxFreedom.com.
ProPublica later discovered code in the site that deliberately hid Turbo Tax’s IRS Free File program from Google searches.
They also found the company made people with disabilities, the unemployed and students pay more for their services after the new tax law was passed and even steered members of the military away from the free version that’s promised by the federal government.