Finance Globe

U.S. financial and economic topics from several finance writers.
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Options for Filing Income Taxes

At the beginning of every year, millions of Americans get ready to file their income tax return. Some do it because they know they’re legally required to file (whether you’re required to file depends on your age, income, and filing status). Others are eager to receive a refund of taxes that were overpaid throughout the year. You have several options for filing your taxes. You want to choose the one that will maximum your refund and eliminate mistakes.

Manually Complete the Tax Forms

Doing your taxes by hand can be time-consuming and confusing, but it’s always free. You can use your previous year’s tax return as a guide, assuming your tax situation hasn’t changed much since last year. That way, you don’t have to start completely from scratch.

You can sit down with the tax forms and tax booklets and hand file your taxes. Tax forms are available at your local library or post office.

Make sure you have the appropriate tax booklet for the form you have, e.g. Form 1040 booklet for Tax Form 1040. You may also need extra forms for your deductions and other tax situations. For example, you’ll need Schedule A to itemize your deductions, Schedule B to declare interest and ordinary dividends, and Schedule C to declare Profit and Loss from a Business.

IRS Free File

The IRS offers Free File tax software for people and couples with adjusted gross income less than $57,000. Your adjusted gross income is your income minus deductions. Don’t rule out Free File just because your salary is above $57,000, once you consider the standard or itemized deductions, your adjusted gross income may fall within the acceptable range. In fact, the IRS says approximately 70% of taxpayers have an adjusted gross income less than $57,000.

Various companies have opted to allow taxfilers to use their software for free. Once you’ve completed your tax return with Free File, you’ll have the ability to e-file your taxes and receive your refund, if there is one, through direct deposit. The software isn’t downloadable, instead you’ll need to prepare and file your taxes online.

Purchase Tax Software

You can use online tax preparation software like that from TurboTax, H&R Block, Jackson Hewitt, TaxSlayer or TaxAct. Preparation and filing may be free depending on the Federal tax form you use. However, you may have to pay for certain tax forms, like a 1040 or for state tax prepration and filing. You typically don’t have to pay until you’ve completed your taxes and you’re ready to file.

Tax software usually has all the appropriate tax codes built in, so all you have to do is enter your income and deductions information. The tax software will calculate the amount of your tax refund or tax due. You can efile or print the forms and file by mail. You still have to be sure to choose the appropriate version of the tax software.

Pay a Professional Tax Preparer

Another option is to pay a tax professional to prepare your taxes, e.g. an accountant, tax preparer, or a tax prep company, like H&R Block. Tax preparers typically charge a fee, either a flat fee based on your tax form or a percentage of your refund. Be careful using those preparers who take a percentage of your refund, they may falsely inflate your income so they can receive a bigger fee.

Paying someone to do your taxes, may not be the wisest use of your money, especially if you file using the very simple Form 1040EZ. On the other hand, a tax preparer can help you if you have complicated tax situation: for example, received a profit or loss from buying or selling stock or you have self-employment income.

Choose your best option early, so you can complete your tax return by the April 15 deadline. If you run out of time, you can file an extension, but remember the extension delays your filing deadline, not your payment deadline.

Source: IRS.gov
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Saturday, 24 August 2019

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