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What Is The Best Way To File Taxes?
By The BIDaWIZ Team - January 4, 2010 Share: Signup - Free Newsletter
As with most tax topics, the answer depends on the situation and requires a discussion with your spouse or business partner. We know this topic can get contentious at times so be sure to discuss all of the benefits and drawbacks of each option. Also, make sure the focus is not completely on which method is cheaper or what method you used last year. The financial positions of individuals and businesses change each year so the method you use to file your taxes should also be re-evaluated. So, what are your options?
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Tax Software Programs
TurboTax, H&R Block At Home, TaxAct, CompleteTax & More
The online tax software business has been booming in recent years as the convenience & cost factors are playing a larger role in how taxpayers decide to file their taxes. TurboTax is the most widely used tax software program which offers a whole host of functionality and user-friendly features but TaxAct is beginning to catch up. The cost is free for an individual federal tax return but if you are filing a state return as well, the cost is around $30 per state. Despite the fact that these tax programs are easy to use and they help streamline the tax refund process, they don't replace the licensed tax professional such as a CPA.
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CPAs & Tax Preparers
Accounting Firm or CPA or Enrolled Agent
The tax service provided by a reputable accounting firm or CPA is still and will continue to be the least risky way to file your tax returns. The cost can range from $150 to $500 per return depending on the complexity & the CPA's experience level. While it can get costly, it is the best option if you don't have an accounting background or if the tax return is for a business. Paying the few extra dollars can save you a lot of money in the long-run.
When choosing a CPA make sure you do a thorough background check by asking for referrals and going to the AICPA website which lists each state's board of accountancy. You will be able to verify that the individual is in fact a CPA and if they have any disciplinary actions against them.
H&R Block, Jackson Hewitt & Others
These national tax preparation chains are another option but they usually do not provide the same level of quality as a CPA or enrolled agent. While the price is affordable (generally starts at ~$100 per return), the risk of mistakes is higher than if a CPA filed the return since the requirements to be a tax preparer at an H&R Block is much lower than it is to be a CPA. The IRS is even beginning to address this issue by imposing a new policy which will regulate paid tax preparers.
Some of our clients ask about the refund guarantees that H&R Block and others offer should something go wrong with the return. Our take is that wouldn't you want to avoid that situation all together? Moreover, would you go to a doctor if they guaranteed to give you your money back or re-perform the operation if something should go wrong? These types of guarantees are a bad sign.
Do It Yourself The Old Fashioned Way
Paper Returns
The final option is only suggested for those with a strong accounting background in both college and beyond. If you are considering this option, keep in mind that it is always better to have another party file your return because it reduces the risk of a mistake.
Don't Forget That You Are Responsible Too
Whichever 3rd party option you choose, make sure that YOU also check the tax return for errors & mistakes. Using a tax software or tax preparer (including CPAs) are not full proof, so take the 15 minutes or so to check the numbers (including your SOCIAL SECURITY # & PERSONAL INFO) yourself. It would be a shame to be penalized for a careless mistake.
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More Tax Questions?
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