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Free Online US Tax Preparation Software Options for Americans Abroad

Free Online US Tax Preparation Software Options for Americans Abroad

Earlier this month, the IRS announced the 2024 tax filing season will open on January 29, I’ve already received emails from people asking about how to file their US tax return for this year. For Americans abroad, this can be a very anxiety provoking and stressful process because it is well documented that filing taxes is more difficult for Americans outside the US than inside the USAccording to American Citizens Abroad, it is estimated that return preparation fees for Americans abroad is between $2,000 and $3,000 and significantly higher for small business owners, while the average fee in 2021 was $323 for a return with itemized deductions and $220 for a return without itemized deductions.

Since Americans abroad are liable for filing and paying tax both in the country they live in as well as in the US, it is difficult for them to understand why they are subject to tax in two countries since their immigrant counterparts don’t face the same tax filing or liability from their home countries. The United States is unique in that its citizens are liable for US tax on non-US sourced income. The US tax code is completely unique and out of step with the tax system experienced in the rest of the world, which makes it difficult for Americans abroad to remain in compliance with their US tax filing obligations, but not impossible.

On top of this, the IRS makes it difficult for Americans abroad to remain compliant with their tax filing obligation for many reasons, but one of them is that online tax preparation software options aren’t American abroad friendly, hence why remaining in compliance with the IRS is so challenging for many. This article attempts to review the online US tax preparation software options for Americans abroad in 2024. I will try to clarify online tax prep software in the market with an emphasis on free, but I have also reviewed a few low cost and paid options since everyone isn’t always able to use the free options, as this is largely dependent on personal circumstances.

The IRS Free File Alliance

Before I go into the options available, it’s important to provide some background information on the software companies that provide free e-file services for the IRS. In 1998, Congress actually banned tax returns in the Internal Revenue Service Restructuring and Reform Act but the tax preparation industry lobby pushed back, since banning tax returns would make the industry obsolete. So in 2001, the president established a task force “to improve government to government, government to business and government to citizen electronic capabilities.” Out of this, the IRS Free File Program started in 2003.

The IRS says that the objectives of the Free File Agreement are:

1. Provide greater access to free, online tax filing options with trusted partners only through IRS.gov

2. Make federal tax preparation and filing easier for and reduce burden on individual taxpayers, and

3. Continue to focus free governmental services for those least able to pay for tax preparation services

A common question I receive from international taxpayers is why the IRS doesn’t have their own in-house e-file program. This year, it changes. In December 2022, Congress provided an injection of much needed funding into the IRS through the Inflation Reduction Act of which $15 million was allocated for the IRS to implement its own direct file program. The IRS quickly put that funding to work to develop the in-house tech and the Direct File program will open as a pilot to a limited number of taxpayers for the 2024 tax filing year. Unfortunately, international taxpayers won’t be able to use Direct File this year, but one of my goals as the International Member of the Taxpayer Advocacy Panel is to request accessibility for international taxpayers to Direct File, sooner rather than later, to ease the burden of filing for us.

Even though Direct File is a great evolution of the IRS and something that most Americans abroad experience with paying tax in their country of residence, Direct File has been viewed as a threat by some of the largest companies in the tax preparation industry. In 2022, Intuit (maker of TurboTax) spent $2.82 million and H&R Block spent $2.3 million lobbying Congress to keep taxes complicated and to fight competition from the IRS creating its own e-file system. In 2021, Intuit (the company that makes TurboTax and the number 1 provider of e-file software in the country) came under fire from lawmakers for scamming billions from taxpayers for services that were supposed to be free. In a letter from Congress to Intuit, it said “Free File was supposed to cover 70% of American taxpayers, but as of 2018, only approximately 3% of taxpayers participated each year.” Shortly after, Intuit became the first tax preparation software company to withdraw from the Free File Alliance since it formed stating “limitations of the Free File program” as the reason for exiting. In May 2022, Intuit was ordered to pay $141 million to customers across the United States who were deceived by misleading promises of free tax-filing services.

Although Direct File is not available for international taxpayers yet, and the existing free e-file options aren’t ideal, there are options available and we have to work with what is currently offered which are the providers participating in the Free File Alliance.

2024 IRS Free File Participants

For 2024, there are 8 tax preparation providers participating in IRS Free File which are:

1. OnLine Taxes (known as OLT)

2. FileYourTaxes.com

3. 1040.com

4. TaxAct

5. FreeTaxUSA

6. TaxSlayer

7. exTaxReturn

8. 1040NOW

It’s worth noting that not all of these providers offer free file to everyone, and most are not particularly friendly for international taxpayers. It’s clear that all of these software providers were built with stateside Americans in mind, and accommodations for international taxpayers (if acknowledged at all!) was built in as an afterthought. Each one has specific criteria where they will accept individuals based on their income, age, and if they’re active military. That said, many of these options can work and are free for Americans abroad, you just have to know which forms you need to file for your circumstances.

I’ve done research on each one and their friendliness towards Americans abroad and rated them in detail below. It is worth nothing up front that all free file providers except 1040NOW & OLT require a US phone number to set up an account on their website, and none of them support filing the FBAR. Keep in mind that if you like one of these options but you’re struggling because it won’t accept your non-US address, you can file with a US address instead. The address you put is a correspondence address, you do not necessarily have to put your physical address for where you live, it just needs to be an address that the IRS can send you letters and you’ll receive them. In a survey, 30% of Americans abroad file with a US address, so if you decide to go down that route, you wouldn’t be alone.

In my role on the Taxpayer Advocacy Panel, I’ve reviewed issues that have included requesting the IRS to require Free File participant companies to not require a US phone number, not require a US address, and allow e-filing for married filing separately with a non-US spouse. In brief, the IRS rejected these suggestions saying it can’t dictate to Free File providers what it can or can’t provide in it’s technology. I personally find this frustrating, because a consequence of this action is that Americans abroad aren’t provided equivalent filing tools offered to stateside Americans. With a barrier like this, as well as many others, it therefore encourages non-compliance, the complete opposite of IRS goals. It is not the fault or the lack of trying that the compliance gap is the widest for Americans abroad out of all socioeconomic groups required to file a US tax return.

This is one of many examples of the inequality that exists between Americans abroad and stateside Americans, therefore it is no wonder why Americans abroad struggle to remain compliant with their US tax file obligations. My point being, it is not the fault of Americans abroad for not being able to file a tax return. It is the fault of the system itself which has many cracks and requires many improvements to get to a place where it is friendly towards Americans abroad. The main thing that most Americans abroad want is to be treated equally, not just equally to stateside Americans, but equally in the way that other immigrants are only taxed in the country they reside. But until the system changes, I believe the IRS should be held accountable and provide services and tools required for Americans abroad to remain in compliance of their tax filing obligations.

OnLine Taxes (OLT)

How to qualify: all incomes for any age
Is a US phone number required to set up an account? No! Although they ask for a US phone number at account creation, you can just leave this field blank.
Can you enter a non-US address on your return? Yes, but if you e-file only the first 35 characters of address lines 1 and 2 (combined) can be sent in the data to the IRS.
Can you enter a non-US phone number on your return? Yes
Can you file married filing separately with NRA? Yes, but first name, last name, birth date, and occupation are required fields.
Common expat forms supported: 1116, 2555, 8938, 8833, 8621, 5471 (full list)
Is it actually free? Yes, totally 100% free
If you don’t qualify for free, what’s the cost? $7.95 upgrade for better support and to include a state tax return
Files FBAR? No
Link to file for free here.

American abroad friendly rating: 8/10

OLT Review: I continue to hear good things about OLT from Americans abroad regularly, and you can’t fault that it’s free for all ages and all income levels. The walk though wizard and interface is pretty good, it’s not 100% but it beats most of the other free file options for usability. It works for people with simple filings as well as complicated filings, but if you need to file for a “foreign trust” which triggers Forms 3520 or 3520-A, then you’ll have to look elsewhere. It wins extra points for being the only Free File provider that doesn’t require a US phone number.

FileYourTaxes.com

How to qualify: Between $8,500 and $79,000 if you’re 64 or younger
Is a US phone number required to set up an account? Yes
Can you enter a non-US address on your return? Yes, but only letters, numbers, slashes, and hyphens allowed in the street address fields (no commas!) Province or state must be filled in.
Can you enter a non-US phone number on your return? Yes, but a plus sign is not allowed. It will accept spaces, parentheses, or dashes.
Can you file married filing separately with NRA? Yes, but their first name, last name, and birth date are required fields.
Common expat forms supported: 1116, 2555, 8938 (full list)
Is it actually free? Yes, no additional cost for forms supported.
If you don’t qualify for free, what’s the cost? The paid version is $45.00 for your federal return and $40 for a state return.
Files FBAR? No
Link to file for free here.

American abroad friendly rating: 5/10

FileYourTaxes.com Review: It’s not the best, it’s not the worst, it’s somewhere in between. It’ll get the job done, but only if you have a US phone number in order to set up the account. It covers basic forms for Americans abroad, but if you have investments, a non-US pension, a non-US business, or anything that makes your return more complicated, you just can’t use this one. If you’re employed or retired, and don’t have anything that could complicate your return, then this one could be a nice option for you.

1040.com

How to qualify: Between $17,000 and $79,000 for any age
Is a US phone number required to set up an account? No, but it’s required to e-file your return
Can you enter a non-US address on your return? Yes, but only up to 35 characters for the address field. Letters, numbers, and dashes allowed, no other special characters allowed. Province is a required field.
Can you enter a non-US phone number on your return? No, and a US phone number is required to e-file your return.
Can you file married filing separately with NRA? Yes, but only if you paper file. It asks you to enter all 9s for your spouse’s Social Security Number and “NRA” for your spouse’s first name (although it required a Last Name to proceed to next steps.) This doesn’t make sense, you’re supposed to put “NRA” in the SSN field. I’d recommend when you print to whiteout the 9s and write in “NRA” instead. Your NRA spouse’s first name, last name, and birth date are also required to proceed to next steps.
Common expat forms supported: 1116, 2555, 8938, 8833, 8621, 5471 (full list)
Is it actually free? Yes, no additional cost for forms supported.
If you don’t qualify for free, what’s the cost? $25
Files FBAR? No
Link to file for free if you meet eligibility requirements here.

American abroad friendly rating: 5/10

1040.com Review: This one wasn’t in the Free File Alliance last year, so it’s new for 2024. Their tax prep walk through is simple, it displays one question at a time on screen so it’s not too overwhelming of a process. The issue I have is that the website was blocked for me so I had to use a VPN to access the website. I had a number of people in different countries check, and the website is blocked in the United Kingdom, Germany, Prague, France, Guatamala, Spain, Netherlands, and Sweden for example, but it’s not blocked in Australia, Japan, Costa Rica, Mexico, Ecuador, or Switzerland. Given this provider has decided to randomly block certain countries, this doesn’t instill confidence that they are looking for international clients. Also, a US credit card is needed if you don’t qualify for the free version.

TaxAct

How to qualify: $79,000 or less between the ages of 20 and 58
Is a US phone number required to set up an account? Yes
Can you enter a non-US address on your return? Yes, but only allows up to 32 characters.
Can you enter a non-US phone number on your return? No
Can you file married filing separately with NRA? Yes
Common expat forms supported: 1116, 2555, 8938, 8833, 8621, 5471 (full list)
Is it actually free? No, you have to upgrade to their Deluxe package which costs $29.99 if you want to file any of the common expat Forms including 1116, 2555, 8938, 8833, 8621, 5471. But Form 5471 is included in the free version (WHY?!)
If you don’t qualify for free, what’s the cost? Starting at $29.99
Files FBAR? No
Link to file for free if you meet eligibility requirements here.

American abroad friendly rating: 6/10

TaxAct Review: TaxAct has a very smooth user friendly interface, it’s very inviting and easy to use. The wizard is great, but you gotta pay. There’s just no way an American abroad can use TaxAct without paying for it. If you’re ok paying, you’re off to the races. But if you don’t want to pay, OLT will probably be a better option for you.

FreeTaxUSA

How to qualify: $45,000 or less for any age
Is a US phone number required to set up an account? No
Can you enter a non-US address on your return? No
Can you enter a non-US phone number on your return? No
Can you file married filing separately with NRA? No
Common expat forms supported: 1116, 8938 (full list)
Is it actually free? Yes
If you don’t qualify for free, what’s the cost? Filing a federal return with all forms supported is actually free, but if you want to file a state return, upgrade for better customer support, file amended returns, and other additional items, it will cost you starting at $7.99. (check pricing)
Files FBAR? No
Link to file for free if you meet eligibility requirements here.

American abroad friendly rating: 1/10

FreeTaxUSA Review: Last year, I gave this one a 0/10, this year I’m giving it a 1/10. They now support Forms 1116 and 8938 and do not require a US phone number to set up an account, so that’s at least something. But they still don’t support Forms 2555, 8833, 8621, 5471, 3520, or 3520-A, which in a majority of American abroad cases, they’ll need at least one of these forms. Their website explicitly states they do not support “customers or preparers living outside the United States when they file their taxes.” This could work for you if you live in a country that doesn’t have a tax treaty, you file 1116 (not 2555), and you file with a US address, but this scenario will apply to very few people living abroad.

TaxSlayer

How to qualify: $44,000 or less for any age
Is a US phone number required to set up an account? Yes
Can you enter a non-US address on your return? Yes, but only allows up to 35 characters
Can you enter a non-US phone number on your return? No
Can you file married filing separately with NRA? It won’t let you enter “NRA” for foreign spouse in the Social Security number field, but it does allow you to leave it blank. I’ve no idea if it allows you to manually amend before you e-file the return, you’ll need to check this before submitting.
Common expat forms supported: 1116, 2555 (full list)
Is it actually free? Yes
If you don’t qualify for free, what’s the cost? $22.95
Files FBAR? 
No
Link to file for free if you meet eligibility requirements here.

American abroad friendly rating: 4/10

TaxSlayer Review: If you are single and employed, don’t want to do the Foreign Tax Credit, don’t have much money, savings, or pensions, then this will be a suitable option for you. The fact that it just lets you leave your spouses’ details blank, makes me feel uncomfortable. It also only supports Forms 2555 and 1116, but doesn’t include 8833 which is needed to claim treaty benefits under your country’s US tax treaty. If you have a complicated return, then you just can’t use TaxSlayer, but if you’re easy with a simple filing, then the the easy to use interface and wizard might do it for you.

ezTaxReturn.com

How to qualify: $79,000 or less for any age
Is a US phone number required to set up an account? Yes
Can you enter a non-US address on your return? No
Can you enter a non-US phone number on your return? No
Can you file married filing separately with NRA? No
Common expat forms supported: None (full list)
Is it actually free? No, only free for people living in 30 states
If you don’t qualify for free, what’s the cost? $29.99
Files FBAR? No
Link to file for free if you meet eligibility requirements here.

American abroad friendly rating: 0/10

ezTaxReturn Review: Given this provider doesn’t accept a non-US address or support ANY of the forms common for Americans abroad, this is a hard no for me. There really isn’t any point in using this platform, unless you live in the US.

1040NOW

How to qualify: $68,000 or less for any age
Is a US phone number required to set up an account? No
Can you enter a non-US address on your return? Yes, but limited to 35 characters
Can you enter a non-US phone number on your return? Yes
Can you file married filing separately with NRA? Yes
Common expat forms supported: 1116, 2555, 8938, 5471, 8621 (full list)
Is it actually free? No, only free for people living in 42 states
If you don’t qualify for free, what’s the cost? $19.99
Files FBAR? No
Link to file for free if you meet eligibility requirements here.

American abroad friendly rating: 7/10

20140Now Review: Being only one of two free file providers that allow you to open an account without a US phone number is a huge advantage. Surprisingly, it also supports most of the common expat forms, whereas the other providers don’t offer nearly the range of forms available on 1040Now. The biggest disadvantage of this platform is it feels like they haven’t updated it since 1995, and it feels a little clunky. Even though this isn’t available for free for Americans abroad, a $19.95 cost to e-file is a hard price to beat.

Free File Fillable Forms

How to qualify: all incomes for any age
Is a US phone number required to set up an account? Yes
Can you enter a non-US address on your return? Yes
Can you enter a non-US phone number on your return? Yes
Can you file married filing separately with NRA? Yes
Common expat forms supported: 1116, 2555, 8938, 8833, 8621, 5471
Is it actually free? Yes
Files FBAR? No
Link to file for free here.

American abroad friendly rating: 5/10

Free File Fillable Forms Review: Free File Fillable Forms isn’t really a tax software, it’s more like an online version of printing the forms out and filling them in by hand. BUT it lets you e-file the forms. The website doesn’t even save your return, you have to re-register with a new account each tax year. But for people that don’t need guidance and are comfortable filling in the forms by reading publications from the IRS’s website, then this is a great option for you. It’s free, no income requirements, no age requirements. Totally gratis, and basic.

American Abroad Online Paid Software Options

So far I’ve focused mostly on free options to file your US tax return, and now I’m going to go over a few options that exist in the market that specialize in US tax returns for Americans abroad which have a fee. You’ll note that the free file providers offer paid options for additional features, if you don’t qualify for the free version, need additional support, or to file additional forms. These paid options aren’t exhaustive, but the ones I’ve heard most Americans abroad having the most success using, and are also some of the cheapest in the market compared to hiring an accountant. There are no restrictions on who they’ll accept as a customer, as long as you pay their fees, they’ll take you on.

The other benefit to these services is that they are companies run by Americans abroad, so their wizards and walk throughs for submitting the information is more intuitive and just plain makes sense compared to structuring the wizard around the forms themselves, like most of the free file providers do. These platform also accept non-US phone numbers, non-US addresses, allow you to file married filing separately with a non-US spouse no problem. They also offer all of the forms, although some forms come at an additional cost. You can also feel a little better knowing that your money is going to fellow Americans abroad.

ExpatFile

Cost: starts at $119 for their standard package, additional costs are added as your circumstances change or get more complicated
Files FBAR? Yes, for the first time this year they will file the FBAR for an additional $49
Link to website here.
Discount Code: Discount codes for ExpatFile come and go throughout the year, I’ll add one here as and when I hear one becomes available.

American abroad friendly rating: 8/10

ExpatFile Review: I’ve heard a lot of good things about ExpatFile, it’s especially useful for people who are retired or working and just want to know that they’ve filed their return correctly with software that seems to know what it’s doing. They charge more as you need additional forms and as your situation gets more complicated, so just make sure you know what the total costs will be before you decide to pay and use them. You can even pay $499 for an accountant to do it for you rather than use their software, but keep in mind that this is the cost for the accountant and if there are additional forms required your price goes up.

MyExpatTaxes

Cost: starts at $169 or €149 for their standard package, additional costs are added as your circumstances change or get more complicated
Files FBAR? Yes
Link to website here.
Discount: 20% off if you sign up using this link. That brings it down to $135.20 or €119.20 in their cheapest package.

American abroad friendly rating: 8/10

MyExpatTaxes Review: Probably the most comprehensive and intuitive tax filing software available for Americans abroad in the market. If you have questions, their e-mail and chat support is very good, they tend to answer very quickly and thoroughly so you’re not scratching you head trying to understand complicated accountant language. They cover a lot of forms in their standard package and it includes filing the FBAR. Forms 8621, 5471, 3520, and 3520-A all come at an additional cost. As is the case with everyone, they charge more as you need additional forms and as your situation gets more complicated, so just make sure you know what the total costs will be before you proceed.

Why All Americans Abroad Should E-File

IRS cafeteria, overflowing with paper returns waiting to be processed / From Washington Post

At the end of the day, it’s up to you to decide how you want to file, but I would strongly encourage you to ensure that your US tax return is e-filed rather than paper filed. This is for a number of reasons:

  1. Mailing a paper return can get lost in the mail when mailing to the US. Even if it’s tracked, your only confirmation is the delivery service confirming delivery, the IRS won’t send you an acknowledgment of receipt. But when you e-file, the IRS does send you an acknowledgement receipt that your return has been received. This is generally a lot less stressful than the guessing game of international shipping. Even if you receive a delivery service confirmation, it is not out of the realm of possibility that your paper return can still get lost in processing at the IRS.
  2. E-filing generally takes 6 weeks to process whereas paper filing takes 8 months. Knowing that your return has been processed and is done and over with sooner is also a lot more reassuring than playing the waiting game.
  3. If you are expecting a refund or a refundable tax credit, e-filing will get the money to you sooner. If you paper file, it will take a lot longer. Some people I’ve heard are still waiting for a refund from 2 years ago, all because they paper filed.
  4. If you sign up for an online IRS account, then you can check online when the IRS confirms processing of your return has completed. Americans abroad have been able to sign up for an online IRS account via ID.me for 2 years now, but it’s still widely unknown. If you have an online account you can not only track your return, but also have access to more features that will become available in the future that will make filing easier from abroad.

I am aware of circumstances where people are using accountants that don’t have e-filing available or their forms aren’t eligible for e-filing. In these cases, I very much want to know why you weren’t able to e-file so I can raise this as an issue with the IRS. After all, we all have the right to be treated equally and to a fair service from the IRS. Any suggestions or recommendations for improvements to IRS customer service, please send them my way!

Have a Suggestion to Improve IRS Processes or Customer Service?

If you have a suggestion on how the IRS can improve processes or customer service for people living outside the United States with a U.S. tax obligation, please consider submitting a suggestion on the Taxpayer Advocacy Panel’s website here.

About the Taxpayer Advocacy Panel

The Taxpayer Advocacy Panel is a United States Federal Advisory Committee whose mission is to listen to taxpayers, identify taxpayers’ issues and make suggestions for improving IRS service and customer satisfaction. TAP is comprised of approximately 75 members who volunteer to serve a three-year term, and represent all 50 states, District of Columbia, Puerto Rico and a member to represent U.S. Citizens living or working abroad.

About the International Member of the Taxpayer Advocacy Panel

I am originally from Ohio, went to college in Wisconsin, and moved to London, United Kingdom to do my masters and upon completion was offered a job, and so I stayed. 17 years later, I am married to a Brit, run a UK company, and volunteer to help Americans abroad in tax advocacy work. I serve on the Special Projects Committee for TAP, which is the committee that handles international issues within the IRS. I am not an accountant, which makes me a minority on TAP, in addition to being the only member on TAP not in the United States, my unique perspective helps bring clarity to the issues, prioritize problems, and provide solutions.

My three-year Taxpayer Advocacy Panel term ends at the end of 2024. Recruitment for the next International Member of the Taxpayer Advocacy Panel will begin in March. Consider applying to become the next International Member of TAP! Read more about what this voluntary role entails. 

Contact Rebecca on tapinternational1@gmail.com

Article by Rebecca Lammers from Medium


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