Through a partnership between the Internal Revenue Service (IRS) and tax software companies, such as Turbo Tax, lower income taxpayers are able to file their Federal tax returns at no cost.
This partnership is known as the the Free File Alliance.
If you meet one of 3 requirements, you can file your Federal tax return for free.
Here is a list of those 3 requirements.
Remember, you only have to meet one of these to qualify.

• Have an adjusted gross income (AGI) of $28,500 or less in the year 2008.
  
• If you qualify for the earned income credit (EIC) for tax year 2008 then you qualify for free Federal tax filing.
  
• If you served active duty military and earned an adjusted gross income (AGI) of $52,000 or less in 2008 you qualify.
  Active duty military also includes Reservists and National Guard.
  You must have a 2008 W-2 form from the military to qualify.
  

Because of the partnership with Turbo Tax and the Internal Revenue Service, taxpayers who qualify can e-file their federal returns for free with the 2007 Freedom Edition software.
In addition, twenty-one states have also created free file programs based on the Federal free filing program.
This means you may also qualify to file your State taxes for free with the Freedom Edition tax software.
Here's a list of those 21 states: Alabama, Arkansas, Arizona, Georgia, Idaho, Iowa, Kentucky, Massachusetts, Michigan, Minnesota, Missouri, Mississippi, Montana, New York, North Dakota, North Carolina, Oklahoma, Oregon, Rhode Island, Vermont, and West Virginia.
The Free File Alliance filing program is designed for lower income taxpayers with simple situations and includes IRS forms and schedules.
However, it is not designed for more complex tax situations.