This following is a guest post by Kim, otherwise known as Mrs. Luke1428. She is a CPA at an accounting firm in Georgia.
As I see it, there are five different methods of preparing your taxes. (Well…six, if you include just blowing it off and not doing it at all. Guess you can imagine I do NOT recommend that!) Here is my assessment of them:
1. Do It All Yourself
a. Paper and pencil: OK, this is still possible. You can just go to irs.gov and download the forms right there and go to it. Geek factor and bragging rights are high, but accuracy level is generally low. It is free, but the pain in the tail factor is off the charts.
b. Online: Yup, this is possible too. You can do your taxes online at the IRS site here. If your Adjusted Gross Income (AGI) is below $57,000 you can use their software for free and anyone can use the free fillable forms. It performs the basic mathematical calculations for you, but other than that, it’s pretty much the same as the paper and pencil method, just a little cooler because it’s online.
No state taxes available for the online version, so you’re still on your own for that.
The Volunteer Income Tax Assistance program is put on by the IRS and allows IRS-certified volunteers to prepare qualified taxpayers’ returns for free. Individuals making $51,000 or less can qualify, as well as seniors in some situations. Check out the link here for more details.
As I understand it, the military has a thriving VITA program, which is cool. I would say if you truly need the help and you qualify, then see if there is a VITA program near you. If you know how to do your taxes, and are just too lazy to do it yourself, then go to option #3 and let the volunteers spend their time on those that are truly needy.
3. Turbo Tax/Computer software
TurboTax is great – I love it. There are times when it may not be right and it’s not too high on the geek factor scale (oh, you answered a question right? Big whoop – you’re so smart). But it’s definitely the best option for most people with simple returns.
Be careful, though — if you are up for confirmation as the Treasury Secretary and don’t pay a tax because TurboTax didn’t tell you that you had to pay it…that excuse won’t stand up in court.
The price is right, and the accuracy is good as long as you understand the questions and answer them properly.
4. H&R Block/Liberty Tax/Jackson Hewitt, etc.
This option would not be my first or even my second choice. If you have a complicated return that you’d like to speak with a professional about, then go for option #5. If you have an easy return and you just want to get it done, go with option #3. You will pay more to file the return than if you are using Turbo Tax. In addition, you will most likely be working with someone who has only been trained by the company to input the data on the forms.
I guess I just don’t see where the need is for these types of places. Clearly I’m in the minority though since I see a dancing Statue of Liberty with a big arrow that says, “TAXES DONE” on my way home from work every day.
One thing, though, is I would never, EVER take the tax refund anticipation loans, if those are even still legal. The IRS actually processes refunds pretty fast, and if you’re doing direct deposit, you can get your refund in a matter of days. Those refund anticipation loans charge an exorbitant amount of interest, and it is probably why I have a bad taste in my mouth about places like this.
5. CPA firm
I truly think that for those that need it, a CPA’s advice is worth its weight in gold. You will pay more for the expertise, but you know that you are getting an expert’s advice. In addition, you’ve got someone on your side if you ever needed to argue your case with the IRS. Chances are, that CPA has spoken with the IRS before and is not quite as terrified as you are.
A good CPA will go over your return with you if you have questions, and here’s the added bonus — they will help you figure out a way to legally lower your tax bill in the future. Price level is the highest here, but so is the accuracy and peace of mind level.
Are there any I missed? Which option did you (will you) use this year? Anyone still go the paper and pencil route?
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