Though I still do my own taxes, my methods have changed over the years. Tax software is thorough and user-friendly, which suits my current, more detailed needs perfectly. At each age and stage of our lives, it’s important to consider our unique circumstances and choose the best method for filing our taxes.
Even in our digital age, some people still prefer to complete their taxes on paper. If filing the old-fashioned way, make sure you determine the most appropriate form for your situation. Form 1040EZ is the simplest to use and best for those filing as single or married filing jointly without any dependents, an income under $100,000 and who will not be itemizing. The next simplest is 1040A, where users claim certain credits and adjustments to income for IRA contributions or student loan interest and also have an income less than $100,000. For more complex situations, like claiming itemized deductions or reporting self-employment income and have taxable income of $100,000 or more, choose form 1040. The IRS offers detailed instructions for each form and their convenient IRS Tax Help Line for Individuals (800-829-1040).
Tax preparation software works well for all of the situations listed above and contains every form you could possibly need. For those intimidated by the typical IRS forms, tax software offers a more user-friendly experience. Posing questions about your life, the program completes the necessary forms based on your answers. Questions probe for information about life events over the tax year, such as moving, job-seeking, children and related expenses, and home-buying. And the software guides you through entering information from the various documents you may have, such as W-2s, 1099s and mortgage interest statements. While you may worry that answering simple questions through a program may not get you the most accurate return, fear not. The major players in the industry carry 100 percent accuracy guarantees.
So how much does this method cost? For those with simple tax returns, there are free options available online. For those with more complex needs, prices start around $20 and rise with the addition of premium features. Many offer e-filing services as well.
Hiring a tax professional may be a more expensive but convenient route to take. You know that shoebox of receipts and forms that you have? Rather than sifting through each item yourself, you can have someone else put the pieces together. And hiring an expert gives you a sense of security that your filing has been done right; there’s no wondering if you could have gotten a larger refund.
Though this may be the priciest way to go, the peace of mind may be worth it to you, especially if you have a more complex return. Though fees vary greatly depending upon location and the complexity of your preparation, according to the National Society of Accountants, the average cost is $273.
Whichever method you choose, remember that April 17th is the deadline for filing your 2016 federal taxes.