The New Year, 2015, means more than just wiping the slate clean or designing resolutions. It also means preparations should be underway to file your 2014 federal taxes. Barring any unforeseen circumstances within the IRS or Congress, filing season begins promptly at midnight on January 20th. This doesn’t give you much time to prep all your paperwork, especially when employers and financial institutions don’t send out their tax forms until the end of the month.
It also doesn’t give you much time to decide which way to prepare and file your taxes. Yes, there is more than one option in the 21st Century. While many people stay with their tried and true preparation techniques, others may want to switch to an electronic mode or, should they be tired of doing all the work, hand it over to a third party. What you do is going to depend on time, the ability to organize, and, being this is a blog about budgeting, what your budget can afford. Here are the options you may wish to look at.
Pros: Tax forms are pretty easy to obtain. You can find them at your local post office, library, or government office. You can also download forms and directions directly from the IRS. And all that’s needed to complete your taxes are you forms, receipts, calculator, and writing implement.
Cons: First, there’s always a risk of error when you handle taxes on your own, particularly when you are filing more than a simple, one-page 1040-E?. Second, you may miss a form which you need to file. Doing this can increase your risk and potentially lead to a audit letter from the IRS.
Pros: Utilizing programs like TurboTax are less intensive than doing taxes via paper and pen. A user can install the software on their computer, upload various records from organizations, and watch the program calculate potential refunds or payments. Many banks now offer free, online versions of programs like TurboTax to file simple taxes. Even Intuit itself, makers of TurboTax, allow online filing of taxes.
Cons: It comes back to a budget. Software programs can cost upwards of $60 for a new copy. Then you need to pay somewhere in the area of $30 to electronically file both state and federal taxes. Finally, should there be an inconsistency with your tax forms, you may need to print them out and mail them to the IRS.
3. Third-party preparation.
Pros: Giving your tax records to a local accountant or company like H&R Block can loosen those stress knots in your shoulders. Professionals in these locations can normally find items you overlooked which may save you money on your payment or give you more in your refund. In addition, for a small service fee, you can get your refund immediately via a check or pre-paid debit card.
Cons: You pay for these services. Companies like H&R normally have a flat fee which they charge for preparation. On the other hand, accountants can charge several hundred dollars to prepare your taxes. And if you’re not receiving a refund, this can make a huge dent in your budget.