Tax Tools and Technology

The Federal Office of Management and Budget’s Quicksilver Task Force obligated the IRS to start offering free tax preparation and filing to eligible taxpayers back in 2001. As a result, the Free File Alliance was formed by the IRS in 2003. Eligibility for the IRS Free File depends on your adjusted gross income (AGI).

E-File is the term for electronic filing or sending your income tax return from tax software via the Internet to the IRS or state tax authority. It's simple and efficient and has become increasingly popular since it was introduced nationally in 1990.

The Internal Revenue Service (IRS) is the federal agency that collects tax revenue for the federal government. It's the entity that's behind all those deductions in your pay and those quarterly estimated tax payments you make if you're self-employed. The IRS has rules you must follow and, if you choose not to, you can face some pretty stiff consequences.

Form 1040 is used by U.S. taxpayers to file an annual income tax return. The 2020 version of the form was its third major restructuring since tax year 2018. The 2020 version continues to replace Forms 1040-EZ and 1040-A, which were eliminated from the tax code in 2018.

Form 1040-X is an amended tax return which can be filed electronically and effectively replaces a Form 1040 that contained errors. It allows you to set things right with the IRS, but it doesn't just include the changed information. The correct information from your previous return must be transferred from your Form 1040 to Form 1040-X as well.

The term "tax year" refers to the calendar year for most individual taxpayers—the 12 months from Jan. 1 through Dec. 31 when you earned income, had taxes withheld from your pay as an employee, paid in quarterly estimated taxes if you're self-employed, or made tax-deductible expenditures. It's the year preceding the typical April 15th deadline for filing your tax return.

Identifying your correct filing status is critical because it determines the tax rates you'll pay and the standard deduction that applies to your income. The IRS offers five statuses you can choose from (and you can choose only one): Single, Married filing jointly, Married filing separately, Head of household, Qualifying widow(er) 

OnLine Taxes (OLT.com) is part of the Free File program, an alliance between tax software providers and the IRS that offers many taxpayers free tax filing options. It's web-based software that you can use to prepare federal tax returns, but you must qualify. With no price tag for many filers, it's one of the best values available.

"TXF" stands for "tax exchange format," a file extension for data files that contain tax-related information. Most income tax preparation software will import this type of file, as do accounting software, spreadsheet programs, and accounting programs. TXF files have the .txf file name extension and are intended for import by tax preparation software.