How to Calculate Your Tax Return Online

Online tax preparation is the method of choice for individual taxpayers and tax professionals, according to a 2008 USA Today article. You can calculate your taxes online and file your return electronically for free by using the Internal Revenue Service (IRS) "e-file" system. E-file is a partnership with cooperating tax software providers that allows you to use their tax preparation software for no charge if you have an adjusted gross income (AGI) under a yearly limit (for 2009 the limit was $57,000). If your AGI is too high, the IRS provides other free tools to calculate your taxes online.

Things You'll Need

• W2 Forms
• Financial records
• Prior year's adjusted gross income (AGI)

Instructions

1. Go to the IRS home page at irs.gov and click on "Individual." Choose "Free File." The page that comes up provides links to the Free File provider listing, free fillable forms and overviews of both free filing options.

2. Choose "I Will Choose a Free File Company" if you think your AGI is under the yearly limit. A list of participating providers will come up, along with a summary of what each provides. Not all allow the full amount of the yearly limit. Some also offer to do your state tax return, but will normally charge a fee for doing so.

3. Select a company to calculate your taxes online and click on the company name. You will be taken to that company's online tax software system. Create an account with a username and password (record these for later use). Once you've done that, follow the instructions provided by the software to enter your information and calculate your taxes.

4. Decide if you want to file your return electronically once you've completed your return. You will need your previous year's AGI or personal identification (PIN) number (if any) to electronically sign the return for online filing. Otherwise, you may print the return out, sign it and mail it to the IRS.

5. Select "File Free Fillable Forms" on the Free File page if your AGI exceeds the yearly limit. This is a database that contains the forms most taxpayers require. They are free to anyone, with no income limit. You must complete the online forms yourself, but the IRS provides complete instructions and online tools, like a calculator.

6. Create an account with the Free Fillable Forms database. Select and complete the forms you need. As with Free File, you can file your return electronically. To do so you need a PIN number or previous year's AGI. You can also print out the forms, sign, and mail your return to the IRS.

Tips & Warnings

• The IRS filing system is available starting about January 15 each year and remains accessible until mid-October, so if you have to file an extension, you can still use either Free File or Free Filable Forms.

• If you need help, you may call the IRS taxpayer help line at 800-829-1040.

• You can still use Free File provider software if your AGI is over the yearly limit. However, you will be charged a fee.

References

• Internal Revenue Service: Home Page
• USA Today: More People File Taxes Early, More E-file
• H & R Block: Tax Tips