- By Bob Goren
- Published 11/29/2011
End of year taxes are never fun, but with the availability these days of tax preparation software, the good news is it has never been easier to pay Uncle Sam.
While there’s a range of tax preparation programs out there to choose from to file your tax returns, this can make it difficult to decide which product will best suit your needs and what the eligibility criteria are.
This guide will help you make the right choice by explaining some important basics about tax preparation software and other helpful resources.
Understanding Free File
Free File is the name of the IRS program which offers free tax preparation software that is designed to encourage more taxpayers to file electronically. The reason it is backed by the IRS is because it saves both you and the government money in time and admin costs, plus it also tends to human eliminate errors when completing tax returns.
These tax preparation programs will effectively prepare and electronically file one federal tax return for free. Many states also offer a State Free File program that allows eligible taxpayers to prepare and file their state tax return. You can find a list of the participating states, along with more information about the federal program, at freefile.irs.gov.
There are 19 companies officially participating in the Free File program to choose from, although certain criteria are required to be eligible for the Free File software, such as having an adjusted gross income of $58,000 or less.
In addition to IRS rules, the companies participating in Free File may have their own criteria which you need to meet – for example, certain free file returns are limited to age related groups, or some participating company’s base eligibility for their program on your state of residence, military status or the Income Tax Credit that you’ve earned.
If you find that you’re are not eligible for the Free file program, there are many additional companies on the market which offer free or discounted programs for eligible taxpayers, such as those who file a 1040EZ (the tax form for those who earn less than $100,000 a year, don’t claim dependents and don’t itemize) or even the longer 1040A form.
Alternative to Tax Preparation Software
If you find your tax return needs make you ineligible for tax preparation software or you’re simply uncomfortable with using a computer, the alternative is to use a tax preparer specialist.
While most tax return preparers are professionals and will provide an honest service to their clients, there are some unscrupulous individuals and companies who could cause you problems by filing incorrect income tax returns. For this reason it’s important to choose carefully.
Here are some tips for finding a good tax preparer:
· Make sure they have the right credentials – as from January 2011, a tax preparer must have registered for a tax identification number (PTIN) to legally charge you a fee to prepare all or part of your tax return.
· Only attorneys, CPAs and enrolled agents can officially represent you the taxpayer to the IRS in any matter, including audits, collection and appeals. Other tax return preparers can only represent the taxpayer for audits of returns that they have actually prepared and duly signed.
· It’s wise to choose a tax return preparer who is affiliated with a professional organization that provides its members with updated education and resources and has a code of ethics.
· Be wary of tax preparers who guarantee they can get significantly larger refunds for their clients than others. Once your taxes are calculated against your earnings, the figure should be more or less the same.
· Don’t choose tax preparers who charge their client fees on a percentage of the refund as you’ll pay more this way.
· The individual or company you have chosen should ideally be available after your return has been filed to answer any questions which the IRS might ask while processing the information.
· To keep yourself covered, take a note of their PTIN and make sure they sign the tax return plus provide a copy to you.
Easy Help and Information from the IRS
The IRS is keeping up with the times – in addition to their website, you can now conveniently find the latest tax information on a range of other digital platforms:
· YouTube – the IRS posts super videos on covering your tax concerns. They’re even displayed in a variety of different languages as well as in American Sign Language (ASL).
· Twitter – IRS tweets include tax-related announcements, news for tax professionals and hiring initiatives.
· Facebook – the official IRS Facebook page has valuable tax information, including help in resolving long standing issues.
· Smartphone app – the IRS2Go application allows you to get tax updates and interact with the IRS at the touch of a button, such as requesting your refund status.
A final point to keep in mind is cyber crime however – beware of scam emails which appear to come from the IRS. The last thing you want is to have your personal financial information pass into the wrong hands, so never respond to unsolicited emails, no matter how official they seem to be. In fact the IRS never sends unsolicited emails to taxpayers, either about their tax accounts or to request sensitive personal details.
Filing tax returns is an unavoidable fact of life, but with today’s tax preparation software, completing your tax returns is a whole lot easier to get right. While a tax preparer can also help, the software solution is less expensive and much simpler than you might think. In my opinion, once you give it a try, you’ll wonder how you ever got by without it.
About the Author: Bob Goren is an independent advisor on tax preparation software in the US.