The annual headache of figuring and filing individual income taxes may become a little less painful for nearly a million Hoosiers.
Indiana has joined 21 other states in adopting the Free File income tax filing system, which is a partnership of the federal Internal Revenue Service and 16 tax preparation companies.
The procedure, which covers state and federal tax returns, is free for qualifying taxpayers.
John Eckart, commissioner of the Indiana Department of Revenue, said, "Nearly 1 million Hoosier taxpayers will qualify to use INfreefile because they have an adjusted gross income of less than $57,000 a year."
A married couple filing jointly may use Free File if their combined income is below the cap. Free File is not for businesses.
Eckart said the program, branded in Indiana as INfreefile, uses free versions of commercially available software from TurboTax, H&R Block and other nationally known tax preparers. Taxpayers with higher incomes typically are charged $25 to $100 for the software.
Julie Miller, spokeswoman for California-based TurboTax, said, "The Free File program is an example of a public-private partnership of the federal and state governments and private tax preparers, with a goal of providing free online tax filing to lower and middle income taxpayers."
She said the free versions are the same as the software sold to higher-income taxpayers: "This product from TurboTax is consistent with our paid version. It is not simplified or dumbed down."
State government coffers collect about $5 billion to $6 billion a year in revenues from individual taxpayers. About 3 million individual returns were filed last year, and nearly two-thirds of them were filed electronically. Only about 185,000 were filed with the old I-File system, but state officials hope INfreefile will appeal to many more taxpayers.
Eckert said both the government and taxpayers can save time and money by filing online rather than with the old-style paper tax return. Electronic filers can receive refunds within days rather than weeks.
The state spends about $2 to process a paper return, compared with 8 cents for an electronic filing, said Revenue Department spokesman Robert Dittmer.
The annual tax-filing season begins soon. The IRS opens the period for online filings Jan. 17. The deadline for filing an Indiana return for the 2011 tax year is April 17.
To get started on INfreefile, Eckart said to head to the state Department of Revenue website at www.freefile.dor.in.gov and choose one of the companies offering free tax filing. Indiana has approved only six preparers this first year: H&R Block, TaxHawk, OLT Online Taxes, TurboTax, Tax Slayer and 1040Now.
Taxpayers can compare these preparers' requirements and eligibility rules to determine which best fits their income, age and other circumstances.
For example, H&R Block sets an age limit of 52 and an income cap of $57,000. TurboTax puts the cap at $31,000 for most taxpayers or $57,000 for active members of the military services.
Tax experts suggest filling out the federal tax return before the state form because much of the information and calculations from the IRS form will transfer automatically onto the state form. The IRS Free File website is www.freefile.irs.gov.
Call Star reporter Bruce C. Smith at (317) 444-6081.
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