Did you know that free online tax filing is available through the IRS website? Free File, available through the IRS, provides taxpayers the ability to prepare and e-file their federal taxes for free. Free File is managed and operated by a consortium of private tax preparation companies. Free File offers two free tax filing options: Free File Software or Free File Fillable Forms. More than 30,000,000 taxpayers have used this free tax filing online service since its inception in 2003.

Which Free Tax Filing Option Should I Use?
Lower-income taxpayers, those with Adjusted Gross Income (AGI) of $58,000 or less, can use the Free File Software option to use name-brand tax preparation software to prepare and file tax forms for free. The other Free File option, Free File Fillable Forms, is available to all taxpayers, including taxpayers whose incomes are greater than $58,000. Both tax filing options are free!

Can I file my State tax return using Free File?
Some states have formed their own agreement with some Free File Alliance members to provide free state tax filing, but they are separate from the national agreement.

Free state tax filing, using Free File, is available to taxpayers in the following states: Alabama, Arizona, Arkansas, Georgia, Idaho, Iowa, Kentucky, Michigan, Minnesota, Mississippi, Missouri, New York, North Carolina, North Dakota, Oklahoma, Oregon, Rhode Island, South Carolina, Vermont, Virginia and West Virginia.

How do I use the free online tax filing service?
Free tax filing is easy, just follow these simple steps:

Prepare for your free federal tax filing
• Gather your tax information
• Determine your Adjusted Gross Income (AGI). Check your last year’s tax return for a quick estimate of your AGI.

Choose a Free File Option
• If your AGI is $58,000 or less, use Free File Tax Software from a Free File company or choose one of your own.
• If your AGI is greater than $58,000, use Free File Fillable Forms.

e-file your tax filing free
• e-file with Free File
• Use direct deposit to get your tax refund quickly and safely and to track the status of your tax refund.
• Pay electronically. Get more information about free tax filing electronic payment options.

Taxpayers should take advantage of this free online tax filing program.

source: irs.gov

Here are three tips you should know about when filing your 2008 income tax. It’s important that you are aware of them now so that you can take action before the 2008 tax year closes (Dec 31, 2008).

Standard Deductions vs. Itemized Deductions
One thing you should know about filing taxes is that it makes sense to compare your standard deductions against your Itemized Deductions.

If your Itemized Deductions exceed the amount of your itemized deductions, you stand a good chance of saving money by itemizing. If your Itemized deductions are slightly lower, try to shift some of your itemized deductions for the following year to the current year. Here is an example:

Let’s say you have the option to pay real estate tax in 2 installations, consider making the payment in 2008 that would normally be paid in the early part of 2009.

Another tip is to do the opposite, if you don’t think you will be able to take advantage of itemizing in 2008, try to shift some of them for the next tax year, This would work if you plan on purchasing a home in 2009 or you could make your annual charitable contributions in January, 2009 instead of December, 2008.

Flexible Spending Accounts
Now is the time to check if you have money left in your Flexible Spending Account. If you do have extra, make some appointments to use it up. If you don’t, you lose the money.

Medical Deductions
You can claim unreimbursed medical expenses that you incur over the year. IRS rules allow you to deduct them only if they exceed 7.5% of your Adjusted Gross Income. If you are close to that level, consider having elective or necessary medical procedures before the end of the year. But make sure to check that it’s among the qualifying deductible expenses.

Adjusted Gross Income (AGI) is a tax payer’s gross income (before taxes) and subtracting allowable IRS deductions. Here are some of the deductions to use when calculating your AGI:

• Certain business expenses of reservists, performing artists, and fee-basis government officials
• Health savings account deductions
• Certain moving expenses
• One-half of self-employment tax
• Penalties on early withdrawal of saving
• Alimony paid
• Deduction for contribution to an Individual Retirement Account (IRA)
• Student Loan interest deduction

But don’t confuse AGI with Itemized Deductions, such as home mortgage interest expense, medical expenses, property taxes, charitable contributions, among others.

Here is a simple calculator to estimate your Adjusted Gross Income