When tax time rolls around in April I would like to know if I can do my own taxes instead of taking it to a tax preparer and paying them. Can I do it for free, without fear of the IRS coming after me for errors I made. I have a straight forward tax situation, so it wouldn’t be complicated. I feel like when I take it to he tax people they do it online real fast and it seems like I can do the same. Is there an income limit for do it yourself tax preparations on the IRS site…like you have to make $50,000 or less?
Your question is a little confusing, but: [ul][li]Yes, you can do your own taxes; you can download the forms from the irs.gov website, fill them out, and mail them in. []However, I don’t believe that it’s possible to file them electronically without the use of a third-party tax preparer or a stand-alone software program. The IRS does have a program called “Free File” under which the fee can get waived if you have less that $54,000 in income.[]The IRS will, of course, “come after” you if they find mistakes in your return; there’s really no way to avoid that. However, if you make an honest mistake, they’re not going to send you up the river for it.[]Still, if you’re sufficiently worried about the complexity of your tax situation that you’re worried you might make a mistake, well, that’s why tax preparers are still in business.[]If you decide to go the paper filing route, then you might want to check out the requirements to file the forms 1040A and 1040EZ; if your tax situation is simple enough, then they can save you a lot of time and confusion.[/ul][/li]
Hope this helps!
Lets also be clear about “errors”.
Your tax preparer (or tax program for your PC) can promise to protect you for things like math errors. What they really mean is they’re willing to gamble they won’t make a math error and if they do they know the IRS just shrugs & sends a bill for the difference to you which they will pay. The IRS treats that kinda like a parking ticket. just pay it & nobody goes away angry.
What they can’t practically do, is protect you from anything else. Forget to tell them about that second job & never declare the income? You got no protection from anyone. Likewise if you just make up numbers of deductions for the fun of it. And the IRS will have an attitude about this kind of mistake or “mistake”.
You can also, of course, do your own taxes using the so-twentieth-century paper forms, available at Post Offices and other places, and on-line as .PDFs you can print out and then mail in.
I made an arithmetic mistake once on a paper form. The IRS just sent me a notice saying they fixed it and will send me the correct refund (I think the mistake was in their favor, not mine, but can’t remember).
Take a look at Tax Act online, not free, but IIRC $9.95, easy to do and has worked correctly for me the last 4 years.
Along the same lines, is there any website where you can model future taxes based on changes to variables? For example, if I know that I’m getting divorced, I will need to file as “single” next year. This would increase my taxes. How would I be able to tell how much this change would be?
Umm, not quite. What a real Tax Pro (EA, CPA or Tax Attorney) can also do is protect you from penalties if you follow the Pro’s advice. Thus, if your CPA sez yes, you can deduct XXX, then you get audited and the IRS sez “no way”- if they propose a penalty you can tell them you relied upon the expert advice of your enrolled tax expert. Then, supposedly- you get no penalty, but the IRS considers one vs your preparer.
I have never used a tax preparer. For the past twenty years I have filed my own taxes every year. Up until around 2003, I did them using paper forms, a pencil (I went over it with pen once I had checked all the answers) and a calculator. When the IRS began offering free online filing, I used one of the online providers off of their list. I selected one that allowed you to do a combined Federal/State filing for my state. For a number of years I could file for free, but now I’ve crossed the limit and need to pay an extra $9.95 to file online.
Of course, I have very simple taxes. When I used paper forms I always filed a 1040A. It usually takes me between one and two hours to complete my taxes and submit them online. I have never been audited or had any kind of issue with the IRS. I find the online filing to be almost painless (no calculations!) It’s worth checking out the online filing providers on the IRS Web site. Each of them will tell you the specific requirements for using their online system (some won’t allow out-of-state income, for example).
TaxAct also has a free downloadable version. I’ve been using it for several years and it’s been very nice.
I just want to clarify that you do not need to use a stand-alone software program to file electronically. You can use one of the online providers listed by the IRS. These are not tax preparers, they are companies that provide online tax preparation programs similar to the stand-alone programs like TurboTax. All you need to do is go to one of their online sites, fill out the forms yourself online, and submit them through the site you’ve chosen. With Free File, you can do this for no charge if your income is under a certain amount, and for a nominal fee ($9.95 for the site I use) if your income is higher.
The IRS recommends that you only choose an online provider by linking directly from the IRS Web site, since there are a some scammers out there.
I used to do the 1040 myself, but the numbers way up top would change, affecting the entire sheet. I kept thinking “man, I really need to make an Excel file to do this”. I just don’t want to buy one of those Tax programs, for whatever reason I’d rather see my numbers as they appear on the actual 1040.
Well, as it turns out, someone made an Excel 1040! It’s at http://www.excel1040.com/ I used it last year and LOVED it, made my life so much easier. The 2008 one isn’t out yet but I’m sure it will be soon.
Also, some of the legitimate providers will charge you if you go directly to their website, but do the Free File thing if you go via the IRS website.
The usual business model for the Free File providers seems to be that they’ll do your federal taxes for free, and then you have the option of paying them to do your state taxes, too. Since you’ve already given them all the information for the federal, they can then do your state very quickly. I’ve never bothered with it, though, since Montana has very simple state taxes (and in the past couple of years, offers their own free online filing).
In addition to being easier online, the first time I did my taxes online, the program found some exemption or deduction or some such that I was eligible for for being a student, which I hadn’t even heard of. It ended up making a couple hundred dollars worth of difference, in my favor.
Slight hijack (not worth starting a thread for): Is there an equivalent of the PAYE (Pay As You Earn) system we have in the UK in the States? Her Majesty’s Revenue & Customs assigns everyone a tax code at the start of the year which allows the employer to deduct the tax before the salary is paid. This means that for most of us with uncomplicated tax affairs (not self employed) we don’t have to file a tax return each year.
Not quite. In the US, we do have sort-of pay as you earn in that we have tax “witholding”, where taxes are required to be deducted from each paycheck by the employer & sent directly to the govt.
BUT, our tax system is complex enough that even simple wage earners must complete & file paperwork at year’s end to determine the actual tax owed. Then the Feds refund the difference if the taxes already withheld are larger than the true taxes owed or else the taxpayer sends in the shortfall with their paperwork.
By design, the witholding rates are slightly higher than the actual tax rates, so in the large majority of cases people receive “tax refunds” early in the next year. This simplifies IRS’s collection problem, given that many Americans save $0 and would be hard pressed to pay a surprise $200 bill. It’s also a spoonful of sugar to help the medicine go down.
There are very simplified tax forms for people with low wages & simple tax situations. Like one page with large type & just a few numbers. There have been proposals over the years to go to a system like the UK has, where in those simple cases the withholding IS the tax, or one where the IRS is responsible for figuring out the difference from reports sent in by the employers & will automaticaly just send out refunds or bills. So far none of those have come to fruition.
Can you provide a cite for the idea that “even simple wage earners must complete & file paperwork” (as in are required to do so)? Because my understanding is that this is not the case.
Maybe I don’t understand your question, and it wasn’t directed to me, but if I may…
According to the IRS, You must file a tax return if your income is above a certain level. The amount varies depending on filing status, age and the type of income you receive. (from their site).
So, a simple wage earner has to fill out the form (at least partially) to determine if he has an obligation to file the form. If the simple wage earner has paid withholding I don’t believe he’ll get it refunded without filing. (I am not certified by the IRS to prepare taxes)
Right, you have to as least file a 1040X if your income is over a certain level. True, if you have a refund coming there would be no penalty if you didn’t file and let the gov’t keep it, but 20 years down the line you might be asked why you didn’t file your 1989 taxes.
That may be what I was thinking of, that there’s no penalty for late filing if no taxes are due.
Yes - it is called withholding. However, the taxes here are so complicated that withholding is little more than an educated guess - you yourself are expected to calculate what the correct amount of withholding should be.
You have to submit a tax return also, at which time you get a refund or pay more to correct the educated guess of withholding. Most people over-withhold so they get a refund when they file their actual tax return. The excess withholding is effectively an interest-free loan to the government. The alternative of withholding less can be dangerous as if you pay too little, you will be hit with interest and penalties.
(I am a Brit living in America, and have paid taxes under both systems.)
I would like to add to that I also had a very good experience with the downloadable TaxAct software. Just avoid the “upsells,” (which there are actually no more of than with TurboTax) and I found it even more usable than TurboTax. I make less than $54,000 a year, so all told doing and filing my taxes took less than an hour and was completely free!
Free except for the taxes, that is.