Why “Free” Filing Tools May Be Costing You Hundreds—Or Even Thousands—This Tax Season

Every year, tax software companies advertise the same promise: “File for free.” And for some taxpayers with very simple returns, this can be a good deal. But as the tax code grows more complex—especially with the new temporary OBBB deductions, expanded credits, and major refund-boosting changes—free tax software is often failing taxpayers where it matters most:

Maximizing the refund.

Many basic (or “free”) versions of tax software do not include every deduction, do not prompt all eligibility questions, and frequently push users to skip over credits they qualify for. The result is a refund that is far smaller than it should be.

This guide exposes the hidden costs of free tax software and explains when upgrading—or using a tax professional—can pay for itself many times over.

Why Free Tax Software Can Undermine Your Refund

Free tax software isn’t truly “free.” The real cost comes from:

• Missing deductions
• Incorrect filing choices
• Oversimplified interview questions
• Limited credit screening
• Insufficient verification tools
• No guided support for new tax breaks

The more complex the tax law becomes, the more money you leave on the table by relying on a basic version.

Here’s how free software quietly erodes your refund.

1. Free Software Rarely Includes New or Temporary Deductions

The 2025–2026 tax years include multiple new deductions under OBBB:

• Overtime deduction (up to $12,500)
• Tip income deduction (up to $25,000)
• Auto loan interest deduction (up to $10,000)
• Senior Bonus Deduction ($6,000 per senior)

Most free software versions do not:

• Ask detailed questions to determine eligibility
• Automatically calculate phase-outs
• Include advanced worksheets for new deductions
• Guide you through the documentation requirements

Missing even one of these deductions can reduce your refund by hundreds—or thousands—of dollars.

2. Free Software Often Fails to Trigger Key Credit Checks

Refund-boosting credits such as:

• Child Tax Credit (CTC)
• Additional Child Tax Credit (ACTC)
• Earned Income Tax Credit (EITC)
• American Opportunity Tax Credit (AOTC)
• Premium Tax Credit (PTC)

require nuanced eligibility screening.

Free software tends to use:

• Short, oversimplified questions
• Limited follow-up prompts
• No scenario-based testing
• No lookback rule guidance
• No dependent tie-breaker analysis

Paid versions provide the depth needed to capture every available credit.

3. Free Software Doesn’t Check for Tax Filing Status Errors

Your filing status dramatically impacts your refund.

Free software often does not catch:

• Incorrect Single vs Head of Household claims
• Divorced or separated parent rules
• Misapplied dependent residency tests
• Qualifying surviving spouse eligibility

A wrong filing status can shrink a refund by $1,000–$3,000.

4. Free Versions Lack Audit and Accuracy Tools

Free software typically does not include:

• Error-checking algorithms
• Income mismatch detection
• W-2/1099 comparison tools
• TC 570 risk predictors
• AI-driven compliance checks

This leads to sloppy returns that are more likely to be delayed, adjusted, or denied.

When a free software mistake triggers an IRS review, your refund can be delayed by:

• 6–12 weeks for a CP05 verification
• 12–20 weeks for identity or wage review
• Months for correspondence audits

A delayed refund is another hidden cost.

5. Free Software Tries to Upsell You Mid-File

While advertised as “free,” many returns cannot actually be filed without upgrading.

Common triggers include:

• Dependent credits
• Student tuition
• Small business income
• Marketplace insurance
• Itemizing deductions
• New OBBB deductions

Most taxpayers learn late in the process that the free version doesn’t support their return—but by then, they’ve already entered hours of data.

6. Free Versions Do Not Provide Priority Support

If something goes wrong, free software offers:

• No live chat
• No phone support
• No tax pro assistance
• No help with IRS notices
• No guidance for identity verification
• No document review

Paid versions and tax professionals can answer questions in real time—often preventing errors before you submit your return.

7. You Risk Missing Refund Timing Strategies

Paid software and tax pros generally provide guidance on:

• Cycle code timing
• IRS processing windows
• PATH Act release dates
• Best filing days for faster refunds
• Avoiding identity-theft triggers
• Optimizing dependents between parents

Free software does none of this.

A smarter filing strategy alone can accelerate your refund by 1–3 weeks.

When You Should NOT Use Free Tax Software

Avoid free software if you:

• Claim new OBBB deductions
• Have dependents
• Attend college or claim AOTC
• Have multiple W-2s or 1099s
• File Schedule C
• Have unemployment income
• Had Marketplace insurance (1095-A)
• Support elderly or non-child dependents
• Have complex life changes (marriage, divorce, new baby)

These returns nearly always require advanced guidance.

When Free Software Is Fine

Free software is acceptable for:

• Single filers
• No dependents
• One W-2
• No deductions beyond the standard
• No refundable credits
• No Marketplace insurance
• No education expenses

These taxpayers have little to gain from upgrades.

Free tax software can be useful—but for many taxpayers in 2026, it is costing more than it saves. With new deductions, expanded credits, and IRS AI screening systems, a basic software version often leads to:

• Missed deductions
• Missed credits
• Filing status errors
• Refund delays
• Smaller refunds

Upgrading to a paid version—or using a tax professional—usually pays for itself many times over.

A correct, maximized return is always cheaper than a “free” return that cuts your refund in half.