If you’re considering doing your own taxes this season, it’s important to remember that federal income tax can be quite complicated. It may be worth it to hire outside help to get them filed correctly.
This guide will help you decide whether or not you should file your own taxes.
How to Do Your Taxes
There are two primary ways to prepare your tax return:
- You can do your taxes by hand and mail them to your local IRS collection address.
- You can file your taxes through an online tax software program or mobile app.
The choice of the method to use will depend largely on the complexity of your tax situation.
If your situation is not complicated, in that you take the basic deductions and haven’t had any significant life changes, you may only need to use the simple Form 1040EZ. You won’t even need to use a tax filing software.
On the other hand, if your tax situation is somewhat complicated, in that you need to fill out Form 1040 or Form 1040 and other supplemental forms, then you’ll need a tax filing software. The software will help you handle the workload.
If you opt to do your taxes manually, you’ll download and fill out the necessary IRS forms and send them to your local collection address. You can get these forms at IRS.gov. You won’t pay for them.
To make a tax payment, you have the option of mailing a check to the IRS directly or using the credit card, debit card, or same-day wire transfer via the IRS online payment system.
This option usually takes more time, but it can be a great option if you have a simple return.
If you have a complicated return or don’t have a lot of time at your disposal, you may need to use a tax filing software to guide you through the process.
Using a tax software is ideal if you generate regular income through the stock market and need to determine investment taxes, you own rental properties, or you run a business and need to calculate capital gain taxes.
What You’ll Need
There are several things you need to do before you file your own taxes. They include the following:
Determine your filing status:
It is imperative that you choose your filing status before you can prepare your tax return. If you don’t understand your filing status, the IRS can help you figure it out by asking you a few questions.
Here are five common filing statuses that could apply to you:
- Married filing separately
- Married filing jointly
- Unmarried head of household
- Eligible widow or widower with a dependent child
Have your documentation in order
Before you start preparing your tax return, get all the pertinent information required for filing your taxes. These may include:
- Your W-2s
- School taxes
- Interest statements
- Receipts for deductible expenses
- Property taxes
- A copy of your last year’s return, if applicable.
- Other applicable forms like Form 1099 if you receive some kinds of income, such as a taxable interest of at least $10.
You should keep all of your documentation safe and conveniently accessible. You might need them when you prepare taxes for future years or for other reasons like applying for a loan.
Find the right tax filing software
There are numerous tax software products to choose from. Take your time to review your options and determine which one suits your situation the best. These software products can easily be found online.
While some programs are designed specifically for personal tax filing, others are ideal for business tax preparation, and others can effectively handle both.
Some of the popular tax preparation software include TurboTax, TaxAct, H&R Block, and TaxSlayer. When you use tax filing software, you will typically be asked questions that are designed to ensure that you pay the right amount of taxes.
Moreover, most paid versions of these software products are packed with valuable information and education that will walk you through every step of the tax filing process.
If you have more questions or don’t seem to understand some things, you can always find help from the IRS website. You also have the option of calling the IRS directly to seek help.
The customer service representatives at the IRS usually are very hospitable and helpful.
Best Tax Software for Filing Your Taxes
There is a wide selection of Tax Filing Software options available on the market today, but let’s explore the top three that you can choose from:
If you have a basic tax return, you can benefit from TurboTax’s free online tax preparation package.
If your return is more complicated, however, you may need to upgrade to the most appropriate of its paid versions, which include deluxe, premier, and self-employed plans.
If you are a freelancer, for example, you’ll need to pay $89.99 to be able to file self-employed returns. With TurboTax, you get access to experienced tax experts to review your returns and if necessary, chat with a real CPA on an “on-demand” basis.
H&R Block also offers a free online tax filing package that is ideal for filing basic returns. It’s paid packages range from $29.99 to $74.99, and they are ideal for self-employed individuals and small business owners.
You won’t be charged to file a state return with the free package. However, you may need to pay $39.99 for each state return depending on the tax preparation model you choose. H&R Block offers its users a maximum tax refund guarantee.
With H&R Block, you also get to enjoy an interest-free loan if you get a federal tax refund not exceeding $3,000. What sets H&R Block apart from its competitors is exceptional customer support.
This company gives you access to face-to-face support, with specialists available at its 12,000 offices spread across the U.S.
TaxAct also allows you to file simple returns for free. If your returns are considered complex, however, you’ll have to upgrade to an appropriate paid packages.
TaxAct also offers some exciting perks. For example, if you put a part of your tax refund on the gift card from TaxAct’s list of qualifying retailers, you stand to receive a $100 refund bonus.
With TaxAct, you’ll also have an easy time importing past year’s tax returns from other tax filing services like H&R Block and TurboTax. This helps to save time when you’re preparing your taxes. It also makes it easy to switch to TaxAct from other tax filing services.
Who Should Do Their Own Taxes?
Generally, people should do their own taxes if they have a straightforward financial and tax situation.
In other words, you can do your own taxes if you don’t have dependents, investments, businesses, charitable contributions, or a considerable number of assets.
Conversely, if you make at least $200,000 a year, it can be overwhelming to do your taxes on your own. It would be a good idea to hire a professional to do the tax preparation for you.
This is because you become more susceptible to an IRS audit once your household income exceeds $200,000.
You could also consider hiring an expert to file your tax returns if you have gone through a life-changing event in the past year.
Engaging a professional may also be essential if you have a more complicated tax situation that may encompass dependents, assets, investments, and businesses.
Another great reason to work with a profession is if you wish to itemize your deductions. While these factors don’t mean that you can’t do your own taxes, they can make it a bit more challenging.
Doing your own taxes can be a great way to save money on tax prep. You can file by hand or use a tax filing software like TurboTax, TaxAct, or H&R Block.
If you have a more complicated tax situation, it may be a better idea to hire a tax professional to avoid making mistakes that will subject you to IRS audits.
No matter which option you choose, tax minimization is an important part of managing your money and making sure you are taking care of your financial responsibilities.