Approximately 120+ million U.S. taxpayers are expected to file a tax return this year. With the Federal tax code now approaching 72,000 pages, it is nearly impossible for taxpayers to complete the process without the help of a tax professional or computer software program. The average taxpayer will spend about 26 hours this year completing the IRS form 1040. Nevertheless, there are many ways that you, as a taxpayer, can save some money when filing your income taxes this season.
Guidelines for Low Income Taxpayers, Military Personnel and the Elderly:
- Utilize Free File for Your Tax Return if You Qualify – Free File is a partnership between the IRS and the Free File Alliance, LLC (FFA). The FFA is basically a collection of tax software companies that allow taxpayers to prepare and eFile their Federal tax returns for free. Of note, some of these software providers will charge a fee to complete state tax returns. Free File is available for taxpayers (married or single) who have an AGI of $58,000 or less in 2010. To clarify, your Adjusted Gross Income (AGI) is wages, capital gains, pensions/annuities (taxable) minus contributions to pre-tax retirement accounts, such as 401ks and traditional IRAs (standard and itemized deductions are not included). The IRS will help you determine your eligibility for Free File and help you select a company through the web form here.
- Take Advantage of the IRS’s Volunteer Income Tax Assistance (VITA), TCE Program or MyFreeTaxes.com if You Qualify – If you are a member of the military or have an AGI of $49,000 or less, you typically can receive free tax preparation services through VITA. Moreover, if you are over the age of 60, you may qualify for free tax preparation services through the “Tax Counseling for the Elderly (TCE)” program. Volunteers working with these programs have been trained and certified by the IRS to assist you with your tax return. For information on the TCE program or to locate the nearest VITA location, call 1-800-906-9887.
Guidelines For Middle to High Income Taxpayers:
- Unless Your Tax Situation is Overly Complex, Use a Tax Software Program – Most individuals who have simple tax returns will not find it cost-effective to hire a professional for their tax preparation services. For between $70-$80 you are better off using industry-leading tax software programs like TurboTax or TaxCut to prepare and eFile both your State and Federal tax returns.
- Do Not Take A Refund Anticipation Loan – Borrowing against your tax refund may be considered part of the cost of filing. The problem with this option is that these loans against your refund not only carry extremely high interest rates, but if your state or the IRS disagrees with something on your tax return (like a deduction or credit), you will then have to pay back a loan that carries a high interest rate.
Many churches and other non-profit organizations in the private sector, such as the United Way, offer free tax preparation help or services as well. It is always best to check within your local community. Furthermore, beware of scams whereby taxpayers receive emails that fraudulently appear to be from a particular organization, such as the IRS or AARP. Never provide any sensitive financial information via email or to an inbound caller.
Overall, there are many ways that you can save this tax season when filing your income taxes. If you do not qualify for any low income tax assistance and your taxes are not too complex, it is best to do your taxes yourself with the help of a tax software program, because tax-preparers can be expensive. However, if you were married in 2010, bought a house, inherited money or simply just experiencing a situation wherein your taxes are much more difficult and complex than in previous years, it is always recommended that you work with a tax professional.
This guest post is contributed by Matt Robinson, a tax accountant and personal finance blogger with a focus on taxes. He contributes regularly to TaxDebtHelp.com’s tax blog, which provides guidance for taxpayers with tax debt problems.