A guest post originally published here.
The IRS tax season just opened on Monday and with that, people are scrambling to get their US tax return in before the deadline. For Americans abroad, this can be a very anxiety provoking and stressful process because it is well documented that filing taxes for Americans abroad is more difficult for Americans outside the US than inside the US. According 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.
The fact that 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 Americans abroad 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 2023. I will try to clarify the options available in the market including free, low cost, and paid options.
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. The tax preparation industry lobby pushed back, given 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 was born in 2002 “as a way to let low-income Americans file their taxes for free without getting rid of tax returns.”
According to the IRS, “The IRS Free File program is a Public-Private Partnership (PPP) between the IRS and the Free File Alliance, a coalition of leading tax preparation software companies. IRS Free File partners are online tax preparation companies which provide free electronic tax preparation and filing of federal tax returns at no cost to qualifying taxpayers (some may also offer free state returns). The IRS does not endorse any individual partner company.” Essentially, you need to be below a certain income or meet specific criteria to use the free e-file options available from the Free File program.
The IRS doesn’t have it’s own in-house e-file program. Congress actually sought to ban the IRS from being able to create it’s own e-file program in the Taxpayer First Act of 2019 due to the tax preparation industry lobby. In 2022, Intuit spent $3.5 million and H&R Block spent $2.65 million lobbying Congress to keep taxes complicated and to prevent the IRS from 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.
By August 2022, the Inflation Reduction Act passed allocating $80 billion in funding for the IRS, with $15 million of that funding dedicated to producing a report to investigate what would be required for the IRS to create its own e-file system. This report is due in 2023, so we’ll have to see what progress, if any, is made on that front. But in the meantime, we have to work with what is currently offered which are the providers participating in the Free File Alliance.
2023 IRS Free File Participants
For 2023, the following tax preparation providers are participating in IRS Free File:
- 1040Now
- ezTaxReturn.com
- FileYourTaxes.com
- On-Line Taxes
- TaxAct
- FreeTaxUSA
- TaxSlayer
However, it’s worth noting that not all of these providers offer free file to everyone. Each one has specific criteria where they will accept individuals based on their income, age, and if they’re active military. I’ve done research on each one and their friendliness towards Americans abroad and rated each one below. It is worth nothing up front that all free file providers except 1 (1040Now) requires a US phone number to set up an account on their website, and none of them support filing the FBAR.
In my role on the Taxpayer Advocacy Panel, I reviewed an issue that the IRS responded to regarding e-filing for non-US spouses. In the IRS response, they said that Free File partners require a US phone number to establish an account, but the IRS can’t change this requirement. Essentially, the IRS can’t dictate to Free File providers how an online account to submit an electronic return is set up. 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 encourage 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.
1040Now
How to qualify: $65,000 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
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, 3520, 3520-A, 5471, 8621
Is it actually free? Yes, but if you don’t qualify for free the paid version is $19.95
Files FBAR? No
Link to file for free if you meet eligibility requirements: https://www.1040now.net/freefile.htm?code=21
American abroad friendly rating: 7/10
1040Now Review:
Being the only free file provider that allows you to open an account without a US phone number is a huge advantage. Surprisingly, it also supports ALL 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. I got kicked out when I was trying to input my non-US address, which I was able to log back in and complete without issues, but it made me feel like entering my non-US address was like trying to give a 2 year old broccoli. Even if your income is over $65,000, $19.95 is a hard price to beat.
ezTaxReturn.com
How to qualify: $73,000 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
Is it actually free? Yes, but if you don’t qualify for free the paid version is $29.95
Files FBAR? No
Link to file for free if you meet eligibility requirements:
https://www.eztaxreturn.com/alliance2023
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.
FileYourTaxes.com
How to qualify: Between $8,500 and $73,000 if you’re 66 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 you can only use letters, numbers, slash (/), and hyphen (-) when entering a street address (no commas allowed!)
Can you enter a non-US phone number on your return? Yes
Can you file married filing separately with NRA? Yes, but first, last name, and birth date are required fields.
Common expat forms supported: 1116, 2555, 8938
Is it actually free? Yes, but if you don’t qualify for free the paid version is $45.00
Files FBAR? No
Link to file for free if you meet eligibility requirements: https://www.fileyourtaxes.com/irs-free-file
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, and don’t have anything that could complicate your return, then this one could be a nice option for you.
On-Line Taxes (OLT.com)
How to qualify: All incomes and all ages
Is a US phone number required to set up an account? Yes
Can you enter a non-US address on your return? Yes, but if you e-file your tax return 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, last name, birth date, and occupation are required fields.
Common expat forms supported: 1116, 2555, 8938, 8621, 5471
Is it actually free? Yes, totally 100% free
Files FBAR? No
Link to file for free if you meet eligibility requirements: https://www.olt.com/main/oltfree/default.asp
American abroad friendly rating: 7/10
OLT Review:
I hear good things about OLT from Americans abroad regularly, you can’t fault that it’s free for everyone regardless of income or age. The walk though wizard and interface is pretty good, it’s not 100% but it beats most of the 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 “non-US trust” which triggers Forms 3520 or 3520-A, then you’ll have to look elsewhere. If it covered more expat forms and didn’t require a US phone number, it’d get a better rating, but it’s definitely good for what it does offer.
TaxAct
How to qualify: $73,000 or less between the ages of 20 and 58 OR between $65,001 and $73,000 if you are 67 and older
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? Yes
Common expat forms supported: 1116, 2555, 8938, 8621, 5471
Is it actually free? No, you have to upgrade to their Deluxe package which costs $24.95 if you want to file Forms 1116, 2555, 8938, or 8621. But Form 5471 is included in the free version (WHY?!)
Files FBAR? No
Link to file for free if you meet eligibility requirements: https://www.taxact.com/ffa/free-file?sc=22050302&promo=TY22FFAFREFILE&utm_source=irs.gov&utm_medium=ffa&ad=ffa
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 or 1040Now are probably going to be better options for you.
FreeTaxUSA
How to qualify: $41,000 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: 8938, 3520, 3520-A, 5471, 8621
Is it actually free? Yes
Files FBAR? No
Link to file for free if you meet eligibility requirements: https://www.freetaxusa.com/freefile2022
American abroad friendly rating: 0/10
FreeTaxUSA Review:
Don’t waste your time, they don’t accept non-US addresses and they just simply don’t support Forms 1116 or 2555 which ALL Americans abroad need to file one or the other, at least. Skip.
TaxSlayer
How to qualify: $60,000 or less and 57 years old 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 allows up to 35 characters
Can you enter a non-US phone number on your return? Yes, but only numbers and spaces allowed
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: 2555 only
Is it actually free? Yes, but if you don’t qualify for free the paid version is $19.95
Files FBAR? No
Link to file for free if you meet eligibility requirements: https://www.taxslayer.com/americanpledge/?source=TSUSATY2021
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 Form 2555 for the Foreign Earned Income Exclusion. 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.
Don’t Forget Free File Fillable Forms
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.
You can go to the IRS’ website to set up an account here: https://www.irs.gov/e-file-providers/free-file-fillable-forms
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 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 $99 for their standard package, additional costs are added as your circumstances change or get more complicated
Files FBAR? No, but they send you an email with instructions on how to do it yourself
Link to website: https://expatfile.tax/
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, keep in mind that this is the cost for the accountant, if there are additional forms required that price goes up.
MyExpatTaxes
Cost: starts at $159 or €149 for their standard package, additional costs are added as your circumstances change or get more complicated
Files FBAR? Yes
Link to website: https://www.myexpattaxes.com/
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, they 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, none of the other platforms in this article files the FBAR so this is the only one if you want to do your tax return and FBAR at the same time. 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
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:
- 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.
- 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.
- If you are expecting a refund, e-filing will get you the refund 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.
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: https://www.improveirs.org/submit-a-suggestion/
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. 16 years later, I am married to a Brit, run a UK company, and volunteer to help Americans abroad in tax advocacy work. My three-year term started in 2022. 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. You can contact Rebecca on tapinternational1 at gmail dot com
Disclaimer: Democrats Abroad cannot provide individual tax advice. Advice requires consideration of your individual circumstances and needs, none of which can be done at this event. We are not tax lawyers, accountants, or advisers. Please consult a professional tax adviser/accountant/return preparer when addressing your personal tax matters.
Democrats Abroad does not endorse or recommend companies or individual guest bloggers. The views expressed in this blog post are those of the respective individuals and companies, not Democrats Abroad. No liability is accepted by Democrats Abroad for the opinions expressed, or for any errors or omissions expressed about matters of tax in any country, your financial planning, or your legal obligations.
If you are in need of tax advice you can consult the IRS Tax Return Preparer Directory to find an advisor or tax return preparer near you or providing online services to meet your needs and budget, though buyers need always beware: https://irs.treasury.gov/rpo/rpo.jsf