According to Benjamin Franklin, there are only two things certain in life: death and taxes. Unfortunately, this year’s April 18th tax deadline is fast approaching.
With a tax code that is 74,608 pages long and changes being made yearly, it’s almost impossible for an individual to be aware of all the tax credits or deductions for which he or she may be eligible. Take the Earned Income Tax Credit, for instance. While this credit is worth up to $6,242, according to the IRS, one out of five eligible tax filers fails to take advantage of the credit.
That’s why I strongly suggest you get help. Consider this:
You only do your taxes once a year, while a professional tax preparer does this for a living.
Who is going to do a better job?
Likewise, software tax preparation packages are programmed to find you the biggest refund.
According to thumbtack.com, the national average cost for tax preparation is $145, with most people likely to spend between $90 to $230 total. Prices increase, of course, with the complexity of your tax situation.
While you might spend more upfront for tax help (either by way of online software or a professional tax preparer), you’ll likely save hundreds or even thousands through tax credits and deductions you might not even be aware of.
Using Tax Software
I personally use Intuit’s TurboTax online software. I love the ease at which the software walks you through doing your taxes.
Last year I spent about $100 for the software to complete my taxes. But, I increased my refund by nearly $1200 with tax credits and refunds I was not aware of but that the software identified for me. (I used a more expensive version of the software since I had self-employed income and expenses to consider.)
H&R Block and Tax Act are two other highly regarded online tax software packages. Typical prices range from $60 to $120 depending on your tax situation.
If you have a simple 1040EZ form you can even file your federal taxes for free.
For a good review of all three online programs, I suggest this Consumer Reports review.
Picking the Right Tax Professional
While tax preparation software is a Godsend for many of us, for those of us who do not like using computers, a professional tax preparer might be the way to go. This is also a smart decision if you have a complex tax situation. You may have been recently married or divorced, for instance, or gone back to school, purchased investment real estate, found a new job, or started your own business or side-hustle.
But, remember, just like any other professional service provider, it pays to do your research. You are ultimately held responsible for your income tax return, even if someone else prepares it.
That’s why you must find a reputable tax preparer. Ask around. Find a friend or colleague who has had a good experience with their tax preparer and can provide you with the appropriate referral. Then, do your due diligence by checking out the preparer with the Better Business Bureau.
In addition, the IRS advises that you check a preparer’s qualifications. All tax preparers who receive compensation are required to have a Preparer Tax Identification Number (PTIN). Ask about fees upfront and steer clear of preparers that base their fee on a percentage of the amount of refund they are able to obtain for you.
Finally, the IRS warns you to never sign a blank return. Make sure your preparer also signs the the tax return and includes his or her PTIN number as required by law.
Taxes can be dreadful, but with right help you can ensure that you pay as little as possible or receive the maximal refund you’re entitled to.
BMWK, how do you file your taxes?