How to Prepare Personal Income Taxes
Before the era of computers and the World Wide Web, there were only a few choices for filing your income tax returns. You could pick up paper forms from the library or post office and sit at your kitchen table with piles of receipts; or you could hire a tax preparer to file your taxes for you. Today, you have a variety of options for preparing your own tax return, including the traditional paper filing, using tax-preparation software or filing your taxes through the Web.
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Paper Filing
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You can still file your taxes the old-fashioned way using paper forms, a pencil and a calculator. You can download the forms from the Internal Revenue Service website at www.IRS.gov and print them out or pick up the forms during tax season (January to April) at your local library or post office. Filing a paper tax return costs nothing other than your time and a postage stamp. However, this method has a higher chance of errors, warns MSMoney.com. The likelihood of errors is approximately 20 percent higher than with tax returns filed online or using tax-preparation software.
Software
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Being able to use a computer and reliable tax-preparation software such as TurboTax, TaxACT and TaxCut makes the chore of filing taxes much easier. The software walks you through the process step by step; it also checks your return for errors. You can purchase the software on CD or download it from an online retailer. Free versions may be available online, although the features are limited and might not be able to cover all of the tax issues that you have on your return.
If you are required to file a state tax return, most tax-preparation software products can accommodate you, although an additional fee may be charged for state filings.
When you finish preparing your return, you can print a copy, sign it and mail a paper form or file electronically, which speeds up your refund, if you are expecting one. The fee for electronic filing may be included in your software purchase or it may be an additional fee.
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Online
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Numerous websites offer tax preparation services. The top software players such as TurboTax and TaxCut are also major players on the Web. The online products do not require you to buy a CD or download anything. You simply log in to the website and work through a step-by-step process of answering questions. The website enters your information into the appropriate tax forms, handles the calculations and checks your returns for errors. You can then print, sign and mail the forms or file electronically.
Online tax preparation and filing services range from free versions to advanced products with more features. Some websites will also file your state tax returns for an additional fee. The IRS offers a "Free File" service allowing lower-income taxpayers, military veterans and others to file federal tax returns free of charge. TurboTax and TaxCut are among the online services participating in the federal Free File service.
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References
- Photo Credit tax forms image by Chad McDermott from Fotolia.com
