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Preparing your own taxes can provide valuable insight into
your financial life.
Keep in mind that if you decide to prepare your own tax return,
there are many effective software programs such as TurboTax,
Kiplinger's Tax Cut, and Web-based tools that help you track
your finances, prepare taxes, and file online.
Preparing even relatively complicated tax returns on your
own is becoming a common, and entirely doable, practice.
Getting Organized: How to Prepare Your Own Taxes
Before preparing your taxes, take the time to organize all
the documents you will need. These documents include all W-2
forms sent from your employers and tax statements sent by
bank accounts and investment holdings. To learn more about
getting your tax documents organized, see our Getting
Organized section in Financial Health.
You can find Web-based versions of powerful tax software,
such as SecureTax
or TurboTax
that help you prepare and file your taxes. These sites are
still best suited to simple returns, but they are becoming
more sophisticated.
Using the Right Tax Form
In the past, you didn't even have to file a return if: no one can claim you
as a dependent and your income is less than $6,800, or if you are age 24 or
younger, your parents claim you as a dependent, and your income is less than
$4,150 (assuming you have no unearned income, i.e., income from
investments).
Below are descriptions of who qualifies for each form in past years - check
with www.irs.gov for the current year:
- You can use the 1040 EZ form if you are single (or are
married and filing jointly) and your total taxable income
is less that $50,000. Note that this form does not allow
itemized deductions, including any IRA contributions. And
you can't use it if you have any income in excess of $400
from investments (interest on savings account, money markets,
stock dividends, etc.).
- You can use the 1040 A form if you qualify for the 1040
EZ form but want to make IRA deductions.
- You must use the 1040 form if you:
- Don't qualify for the 1040 EZ form but have a relatively
simple and straightforward tax return
- Have a moderately complicated tax return and want
to learn about your personal finances and the tax system.
Keep in mind that if you are going to prepare your own
moderately complicated return, there may have been changes
to the tax code, so your chances of making mistakes
are increased. This could be costly if you happen to
be part of the 1% that the IRS decides to audit. Read
more about Professional
Tax Help to see if you could benefit from professional
advice and assistance.
Filing Your Taxes Electronically
If you are going to prepare your taxes, you may want to
file them electronically instead of sending them via U.S.
Mail. E-filing or electronic filing is a quick, easy, and
accurate alternative to traditional paper returns.
Advantages of Filing Electronically
- You receive your refund in about 3 weeks instead of the
usual 10 weeks.
- Your chance of getting an error notice from the IRS is
decreased because it is more accurate than mailing a paper
return. The error rate for electronic returns is less than
1% as opposed to the 20-21% error rate for paper returns.
- You get proof that the IRS has accepted your return within
48 hours.
- Your privacy and security are assured.
How Does Electronic Filing Work?
- You prepare your return(s) on your computer using commercial
tax
preparation software (such as Turbo Tax and Tax Cut), submit
it electronically, and wait for an electronic notice of
receipt.
- Upon receipt of the return information, IRS computers
automatically check for errors or other missing information.
- You will be notified if the return has been accepted or
rejected. If it's accepted, you will need to send the signature
document (Form
8453-OL, US Individual Income Tax Declaration for Online
Filing) with your W-2 form and any other necessary supporting
documents.
- If your return is rejected, the electronic return transmitter
will assist you in the correction process as part of its
customer support.
How to File Electronically
- Get the necessary tax software. TurboTax
, SecureTax
, and Taxsoft
all include an online filing option as part of their software.
- Prepare your taxes and submit them electronically.
- Get Form
8453-OL, and once your tax return has been accepted,
fill it out and send it in, along with any other documents
that are required for your specific situation. Your tax
software should tell you what forms you need to send in
addition to the Form 8453-OL.
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