Tax preparation firms boast about free services, but the constraints are high

Do-it-yourself types who are looking for a deal for online tax preparation are seeing plenty of promotions.

You're going to need to review the restrictions and rules to figure out which deal actually saves you money and which doesn't.

Gig workers or self-employed workers, for example, often don't qualify for free services and can be directed to higher-cost online options at places like TurboTax, H&R Block and TaxAct.

Jackson Hewitt Tax Service is rolling out a $25 flat rate if you do your taxes online. The fee covers both state and federal, and as many state returns as needed. If you need to file multiple state returns, you'd still pay one flat fee.

Given that inflation has many consumers fearing higher prices ahead, Jackson Hewitt Online is promoting a three-year, $25 price lock for all customers who file their 2021 filing with the company.

Zach Cohen, head of digital products for Jackson Hewitt, said going with one flat price gives consumers the reassurance that they won't be charged more than expected. "Really, the online tax preparation market has tried to gamify pricing," he said.

"Companies broadcast free upfront but then they force people to upgrade as they get deeper into the process of preparing the taxes."

The actual price tag for some consumers who go online to use software to prepare their own taxes can end up being $75 to $125 or more, Cohen said.

"It's absurd," he said. "And we decided to take a stand."

TurboTax, H&R Block and TaxAct continue to offer some online free services. TurboTax announced a new "$0 Any Way" offer, which the company said will apply to about 60 million filers with a simple tax return. There are no income restrictions.

Last tax season, the company said, more than 17 million people filed their taxes with TurboTax and paid nothing, which was more people than in any year in company history. This year, TurboTax said it is expanding its free offer, allowing filers with simple returns to file completely free of charge using its different services.

H&R Block is advertising on TV this season that more people can file for free with them than TurboTax.

H&R Block said it offers some more forms under its free filing offerings than TurboTax. Tax filers need to review their tax situations and forms, as they try to find the best free services.

The "Free File" system at IRS.gov continues to remain an option for many people, but again it won't work for everyone. If your adjusted gross income was $73,000 or less in 2021, you can use free tax software to prepare and e-file your tax return at IRS.gov.

Susan Tompor is personal finance columnist at the Detroit Free Press.