TurboTax is the most highly rated free tax return software.

Randy writes for About.com:

If you haven't sent in your tax return yet and you are thinking of filing your return electronically, you probably already know that there are many firms and most tax software packages that make it easy to file your tax return electronically. However, most of these services will charge you to e-file. For example, TurboTax charges $16.95 to e-file your return. However, you may be able to electronically file your Federal return for free. There may still be a charge for e-filing state taxes.

The Free File program is a free federal tax preparation and electronic filing program for eligible taxpayers developed through a partnership between the Internal Revenue Service (IRS) and Free File Alliance LLC, a group of private sector tax software companies (many of whom don't make it readily apparent that you can file for free). Free File allows taxpayers with an Adjusted Gross Income (AGI) of $52,000 or less in 2006 to e-file their federal tax returns for free. Nearly 70 percent of all US taxpayers qualify for free filing.

Visit the Free File secton on IRS.gov to see if you qualify and to get started.

Important: Only access the Free Filers from the IRS website. There have been reports of phishing related to phony Free Filers.

The IRS says:

Puzzled by the tax law or which credits and deductions to take? Need assistance with your tax return?

You may want to visit a volunteer site. The IRS Volunteer Income Tax Assistance (VITA) Program or the Tax Counseling for the Elderly (TCE) Program offer free tax help if you qualify.

Trained community volunteers can help you with special credits, such as Earned Income Tax Credit (EITC), Child Tax Credit, and Credit for the Elderly for which you may qualify. In addition to free tax return preparation assistance, most sites also offer free electronic filing (e-filing). Individuals taking advantage of the e-file program will receive their refunds in half the time compared to returns filed on paper – even faster if you have your refund deposited directly into your bank account.

Volunteer Income Tax Assistance Program (VITA)

The VITA Program offers free tax help to low- to moderate-income (generally, $40,000 and below) people who cannot prepare their own tax returns. Certified volunteers sponsored by various organizations receive training to help prepare basic tax returns in communities across the country. VITA sites are generally located at community and neighborhood centers, libraries, schools, shopping malls, and other convenient locations. Most locations also offer free electronic filing. To locate the nearest VITA site, call  1-800-829-1040.

Tax Counseling for the Elderly (TCE)

The Tax Counseling for the Elderly (TCE) Program provides free tax help to people age 60 and older.  Trained volunteers from non-profit organizations provide free tax counseling and basic income tax return preparation for senior citizens.  Volunteers who provide tax counseling are often retired individuals associated with non-profit organizations that receive grants from the IRS. 

As part of the IRS-sponsored TCE Program,  AARP offers the Tax-Aide counseling program at more than 7,000 sites nationwide during the filing season.  Trained and certified AARP Tax-Aide volunteer counselors help people of low-to-middle income with special attention to those age 60 and older. 

For more information on TCE call 1-800-829-1040.  To locate the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's Internet site. 

Military personnel and their families get free tax help!

The military also has a strong Volunteer Income Tax Assistance (VITA) Program. The Armed Forces Tax Council (AFTC) consists of the tax program coordinators for the Army, Air Force, Navy, Marine Corps, and Coast Guard.  The AFTC oversees the operation of the military tax programs worldwide, and serves as the main conduit for outreach by the IRS to military personnel and their families.

Marines, airmen, soldiers, sailors, and guardsmen, and their families worldwide receive free tax preparation assistance at offices within their installations.  These VITA sites provide free tax advice, tax preparation, and assistance to military members and their families.  They are trained and equipped to address military specific tax issues, such as combat zone tax benefits and the effect of the new Earned Income Tax Credit (EITC) guidelines.  The military tax programs generated over 287,644 electronic 2006 federal income tax returns. 

Commanders support the program by detailing service members to prepare returns and by providing space and equipment for tax centers. The IRS supports these efforts by providing tax software and by training service members to prepare taxes at the military sites. 

Most service members file their tax returns electronically at their tax centers and, by selecting direct deposit, receive their refunds in as little as one week. This combined effort ensures that service members receive free tax assistance from well-trained and equipped military tax preparers.

Items you need to bring to the VITA/TCE Sites to have your tax returns prepared

  • Proof of identification
  • Social Security Cards for you, your spouse and dependents and/or a Social Security Number verification letter issued by the Social Security Administration
  • Birth dates for you, your spouse and dependents on the tax return
  • Current year's tax package if you received one
  • Wage and earning statement(s) Form W-2, W-2G, 1099-R, from all employers
  • Interest and dividend statements from banks (Forms 1099)
  • A copy of last year's Federal and State returns if available
  • Bank Routing Numbers and Account Numbers for Direct Deposit
  • Total paid for day care provider and the day care provider's tax identifying number (the provider's Social Security Number or the provider's business Employer Identification Number)
  • To file taxes electronically on a married filing joint tax return, both spouses must be present to sign the required forms.

It is extremely important that each person use the correct Social Security Number (SSN).  The most accurate information is usually located on your original Social Security card.  Each year hundreds of thousands of returns are delayed in processing, or credit/deductions are disallowed because names and Social Security Numbers do not match Social Security Administration records.  To prevent processing delays in paper returns and rejected electronically filed returns, volunteers check the accuracy of each Social Security Number, as well as the spelling of the name associated with the number.  If you do not have a Social Security Number for you or a dependent, you should complete Form SS-5, Social Security Number Application.  This form should be submitted to the nearest Social Security Administration Office.

If you or your dependent is not eligible to get a Social Security Number, you may need an Individual Taxpayer Identification Number (ITIN).

If you have not received your Forms W-2 from your employer and want to know what to do, you may obtain information here.

There are payment options available when using IRS e-file. 
If you owe, you can make a payment (by April 15) by authorizing an electronic funds withdrawal (direct debit) from a checking or savings account, paying by credit (Discover Card®, American Express®, MasterCard® or VISA® Card), or by check or money order (payable to the United States Treasury) using Form 1040-V, Payment Voucher.