If you plan to use a tax filing software program this year like Turbo Tax, make sure your decision to do so will get you the most for your money. After all, the purpose of filing your tax return is to get the largest possible return (without cheating the government of course) and with time winding down until April 15th, it's important to weigh the pros and cons of different programs.
Most people are drawn to tax filing software because it is generally inexpensive to use, which is a definite plus. The deluxe version of Turbo Tax is available on its website for $49.95, and it allows you to itemize federal and state returns so you can take as many deductions as possible. But a free version of the software is also available for filing federal taxes for those who don't have to itemize and can file the 1040EZ form. Turbo Tax does include audit support that is "downloadable" from its audit support center, but that means the support is from online information -- not from a live person.
A premium version of H&R Block's Tax Cut is available on its website for the same price of $49.95, but unlike Turbo Tax deluxe, Tax Cut includes one free session of tax advice and audit support from a tax professional. H&R Block also has a free federal 1040EZ form version for those who don't have to itemize.
Independent software provider TaxACT sells an "ultimate" version of its software for $16.95, which includes federal and state forms and free help with a tax consultant. But the Web site doesn't mention anything about audit support.
All of these programs will save you money (versus using a professional tax preparer or accountant), but is there anything else to consider when using software programs to file your taxes?
Filing with a software program allows you to e-file, which will get your return back to you faster than snail mail. Electronic filing will generally get you a return within two weeks versus six weeks or more by regular mail. This is also a plus.
But when you use a software program to file your taxes, unless it includes help from a tax professional, the only deductions you are entitled to are the ones YOU know about. The software will prompt you to see if you qualify for some deductions, but it may not cover everything you may be entitled to. Anyone with complicated situations, like having worked two jobs in two different states during the year, is usually better off spending the money on a tax pro to shed light on their tax liabilities and potential deductions. Generally, the more complicated your tax situation, the more sense it makes to find a good tax professional to help you lower your tax bill.
And even if the software program offers you a consultation with a tax professional to ask questions, you still have to prepare the form. If you don't get all of your questions answered in the ONE free consultation, you'll have to call back -- and the second call won't be free. If you wind up paying for another consultation, you might as well pay for comprehensive service and get the full benefit of a tax professional's knowledge from the beginning.
Furthermore, if you use tax software, it is also your responsibility to check the tax tables that the software program is using to make sure they are accurate. If you use the wrong version of the software, or if it includes an outdated table, your tax liabilities will be miscalculated and you will be liable for any mistakes. The IRS auditor will not accept "the tax software made a mistake" as an excuse.
So if you don't have a very complicated tax situation, and you don't mind filling out forms or studying tax law changes from year to year, using a software program might be for you. If not, leave it to the professionals and write off your tax preparation charges on next year's return.
8 Early Tax-Filing Steps to Make Now
Tax Moves to Make Now
Earlier is better when it comes to working on your taxes, for both you and the Internal Revenue Service. By getting a head start on tax preparation, you avoid the last-minute rush, when many filing mistakes are made. And the sooner the tax agency gets your return, the sooner it can process it and get your refund on its way to you.
Click through our gallery to see eight ways to get a jump on your taxes long before the April 15 deadline rolls around.
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Track Down Your Rebate Data
Did you get an economic stimulus payment last year? That amount really was an advance credit against your 2008 return. The amount you received in 2008 could affect your 2009 credit claim. If you got less than the maximum amount, which for most employed taxpayers was $600 per single filer ($1,200 for married couples filing jointly), you might be able to claim the rest of it this filing season. All versions of the individual tax return (Forms 1040, 1040A and 1040EZ) have a new line to claim the Recover Rebate Credit. You'll need the statement you got from the IRS in connection with your payment.
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Get Ready for the
Arrival of Records
When your W-2s, investment statements and other tax-related documents start coming in, create a collection point and put them there. It could be as simple as a large envelope. You might have received a few documents in December, but most will arrive throughout January. Just make sure that whenever the material shows up you put it all together in an accessible place, so when you are ready to fill out your return you have all the data you need. Remember, the IRS gets a copy of most of these, too, so figures on those statements are critical to ensuring your return sails through the system.
Track Down
Social Security Numbers
Before the IRS will process any return, the agency must have your correct Social Security number, as well as your spouse's, if you file jointly, and those of any dependents you claim. These numbers are crucial because so many transactions are keyed to them. The IRS also checks the identification numbers against any tax breaks you apply for, such as the Child Tax and Additional Child Tax credits, credits for educational expenses and the dependent care tax credit. So make sure everyone in your tax family has a valid Social Security number and that you have them written down correctly.
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Find Your Forms
Slightly more than half of all taxpayers filed their returns electronically last year, meaning all the forms were provided in the tax software. The other half who filed the old-fashioned way will get a tax packet in January, but it never hurts to have backup forms in case you make a mistake. Plus, your tax situation may have changed, meaning you need material other than what's in the IRS package, since it's based on your past filing history. A few of the most common forms are available at post offices and libraries. Most of the rest can be downloaded from the Internet.
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Decide How You Want
To Do Your Taxes
Gathering the appropriate tax forms goes hand in hand with how you plan to complete your return. Which preparation method fits your tax style? Are you a do-it-yourselfer or should you hire a pro? Do you prefer pen and paper or a computer? Now's the time to decide. By starting early, you have plenty of time to gather filing paperwork yourself, pick the perfect tax preparer or find the tax preparation software that fits your needs.
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Consider Electronic Filing
If you decide to use your computer to calculate your taxes, consider taking the next step and file the forms electronically. E-filed returns are processed in about half the time of paper ones, according to the IRS. Plus, e-filing catches math problems and provides confirmation your return has been received. You might even be able to e-file for free via the Free File Alliance, a joint venture of the tax software industry and the federal government. Last filing season, taxpayers with adjusted gross income of $54,000 or less were able to file at no cost via the IRS program.
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Use Direct Deposit
Regardless of whether you file electronically or the old-fashioned paper way, this year have your refund check directly deposited into your bank account. Again this filing season, you can have your refund sent directly to up to three accounts. You'll just need to file Form 8888. Whether you have your tax cash deposited in one, two or three accounts, there's one big advantage: You won't have to worry about the check being lost in the mail or returned to the IRS because of a bad address. Even better, you'll have access to your refund sooner. Just be sure to put the correct routing and account numbers on the form.
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Don't Panic
Tax filing makes everyone a little nervous, but when you start early, you've got time to get the answers and make sure you're taking full advantage of every tax break for which you're eligible. Check Bankrate's tax pages throughout the filing season for more tips, stories and explanations of tax laws and how to make the most of them. If you have a specific question, ask our tax expert. You also can visit the IRS Web site or call its TeleTax service at (800) 829-4477 to get recorded information on more than 140 tax topics.
• See Full Article at Bankrate.com
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Comments: (1)
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By: Raechal12 on 4/14/2009 7:34PM
I would definitely suggest Turbo Tax — the free edition. It's free (again, this is important) and if you use it every year, it's really easy to call up your return from the year before or a few years before, which I've had to do, since I've worked in several states. (By the way, if you do your state taxes, it does cost, but not very much, I think like under $20 per state.)
But it really does make sense to file by the deadline. http://theloop21.com/news/5-reasons-pay-your-taxes-time
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