Friday, February 20, 2009

Economical Tax Filing Options

So, you've collected all your paperwork, taken a deep breath, and are ready to do your 2008 income taxes. Where do you start? Here's a quick rundown of the most economical and practical filing options:

Mail-In Forms
The most obvious method, of course, is to skip down to your local library, grab the federal and state forms you need (or download them from the IRS website), gather your calculator and a pencil, and get down to business. This method probably takes the longest, but personally I think it's the best way (along with the e-file option below) since, in the process of researching which forms you'll need and reading through all the instructions, you'll learn a ton and possibly discover some savings that tax software might not alert you to.

IRS E-file

This is the quickest DIY option. It's the same as above, except you fill out the forms and submit them electronically. 37 states plus DC currently participate in the IRS's Federal/State E-file.

IRS Free File (online software, federal taxes only)
If your AGI is $56,000 or less, you can visit the IRS website, where you can choose from a variety of tax prep software to use for free via the IRS's Free File Alliance.

TurboTax Free Edition (online software)
TurboTax Free is a decent option for filing your federal taxes if you're in a hurry, don't care to learn how things work, and are eligible (and want to) file the 1040EZ (see MDT's recent post for more info on the EZ form). Filing your state taxes with TurboTax will cost you $25.95.

H&R Block TaxCut (online software)
TaxCut Free is pretty much the same deal as TurboTax Free (above), but they'll charge you $30 to file the state return.

TaxAct (online software)
The most economical and most functional free software I've found is TaxAct Free. They don't restrict federal filing to the simple forms, and while they do charge for state filing, at $13.95 it's significantly less than what the above two companies charge.

Get Someone Else to Do Them for You
If you're lazy (or concerned about screwing something up) and have money to throw around, you can of course hire an accountant to do your taxes for you. This is the least economical but certainly the easiest way to get your tax returns taken care of.

If you're concerned about screwing something up and don't have money to throw around, you might want to check out the IRS's Volunteer Income Tax Assistance Program, which offers free help to people who are not able prepare their own tax returns and whose yearly income is less than $42,000.

Last of all, don't forget to sign up for the direct deposit option (if you're getting a refund) for quickest delivery.

A note on state taxes:
If you live in one of these states, you don't have to worry about filing state taxes since they don't impose state income tax.

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