Income Taxes: Free Filing + Money Saving Tips

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I’ll admit it, I actually like taxes. In fact, I love them. If I didn’t, I wouldn’t have completed thousands of returns in the past 10 years. While I can do nothing to change the amount of your return, I can offer you several tips on how to save on your preparation fees and maximize your refund.

DO IT YOURSELF That’s right, yourself. Taxes are not difficult, just basic data entry. Very few returns require additional knowledge, and almost everyone will fall into the basic category. A basic return will contain one or more of the following: W-2, 1099, education credits, Earned Income Credit (EIC), and Child Tax Credit.
YOU DO NOT HAVE TO PURCHASE EXPENSIVE SOFTWARE TO COMPLETE YOUR TAXES I have recommended www.taxact.com to hundreds of people that would like to attempt self-preparation. This is one of the easiest to navigate sites I’ve seen. TaxAct has a downloadable and a web version. I personally use the web version. The best thing about TaxAct? It’s FREE!! There are packages that require a fee, but those are not necessary to complete your return. The only cost you will pay is to file your state return (if your state still charges a fee), as you would with any software.

With purchased software such as Turbo Tax, you not only have to pay the initial cost of the software, you will have to pay to file your federal and state returns.
TAKE ADVANTAGE OF STATE PROGRAMS. There are many programs set up by the state to help individuals with tax preparation at no charge. There are different programs set up for low-income, senior citizens, and disabled persons. Check with the local colleges and Social Security Administration for a list of participating locations.
FREE FILE IS AVAILABLE THROUGH THE IRS WEBSITE. www.irs.gov has FreeFile available on their website. This can perform the same federal tax return as TaxAct.
IF YOU CHOOSE NOT TO SELF-PREPARE, SEEK OUT A CPA A CPA will charge as much as 80% less than a franchised tax preparation service. The average CPA return will cost you around $60-$80, while a return completed by the ‘People’ begins at $180 for a single person with no dependents and one W-2. The average cost of returns filed by the ‘People’ is $290.
PAY FOR YOUR RETURN UPFRONT So many people have told me that they choose franchised operations because they simply cannot afford the $60 to file a return with a certified accountant. If you cannot afford the $60, how can you possibly afford to lose the $200-$300 by filing somewhere else?
DO NOT FALL FOR THE INSTANT REFUND GIMICKS If you file with direct deposit, it should take 10-14 days to receive your refund. There is a schedule that can be found at www.irs.gov that will tell you what day to expect your refund based on your filing date. An instant refund will charge you an upwards of 400% in interest. The average amount deducted from an instant refund (including filing fees) is around $800. An instant refund can take from 1-4 days to receive.
IF YOU ARE A SENIOR OR DISABLED, CHECK OUT THE NEW PROPERTY TAX CREDIT GUIDELINES. Even if you’ve never qualified for PTC before, check into it this year. The State of Missouri has raised the maximum income tremendously this year. I believe the cap is now $30,000. Even if you do not need to file a regular return, you can file a PTC. This will entitle you to a refund of up to $400 of your property taxes. More information is available on the Missouri Department of Revenue website.
REPORT THE AMOUNT OF YOUR STIMULUS PAYMENT. The payment that was received last summer was based upon an estimate of your 2008 earnings. If your earnings have changed, it is quite possible that you may qualify this year. It is also possible that you may have to return a portion of the payment. If you do not remember the exact amount of your check, you can view the information at www.irs.gov.
KEEP RECEIPTS FOR ALL DONATED ITEMS. With your newfound couponing and shopping skills, chances are that you have made some donations. Make sure you obtain a receipt for all items donated. Many times the receipt will be for the value of the item, not the purchase price. This can really help reduce taxable income, if applicable.

Information to note:

-No specific tax program will give you a higher refund. All programs should figure the taxes identically. If you try different programs, or even go to an accountant or tax preparer and you have a different refund amount, there is a mistake somewhere. So many people think that Turbo Tax can get them a higher refund or that H&R Block can do better. If you are getting a higher refund from one place, you really need to double check it. If identical information is input, you should have identical refunds.

-Individual situations can differ, so if you have any questions at all about self-preparation, check out ‘Publication 17? which is issued by the IRS. You can pick up a hard copy of the book for free at the Post Office, and it is also viewable online. Please do not take any advice from someone who is not a qualified professional. The most problems that I have seen occur from the ‘he said, she said’ chain of communication.

-Please remember that the majority of employees (not all) at the franchised tax preparers undergo a weekend training course. There are a couple of great preparers at each office, but many are seasonal employees with absolutely no education or previous experience.