There’ve been lots of ads about filing your taxes for free online. That’s all fine and dandy, but if you’re not careful, it’s not really free. For example, if you go to the IRS website, you can probably file a free federal tax return, but there will be a charge for filing the state return. What tends to happen; is people go to the IRS site, file their federal return and then don’t file their state return because they have to pay for the state program. They decide that they’ll get the forms from the library or someplace later and then they “forget” and then get a nasty little note from the state saying they owe money. That’s when they wind up calling someone like me (or worse one of those “pennies on the dollar TV ad places”) and they pay much more for fixing their tax problem than they would have had to pay in the first place.
So, is there really such a thing a totally free e-file? Yes, but there are restrictions. For example: here in Missouri, you can go to the Missouri Department of Revenue site and get a free state and federal tax return program. Generally, you’ll have to qualify for the Earned Income Credit, or be under age 20, or be in the Military. You must access one of the tax providers from the Missouri website to get the free tax return. Here’s the link: http://dor.mo.gov/personal/individual/vendors.php#freeonline
The most important thing to remember is that you have to access the tax programs from the Missouri website in order to get the free filing! The same holds true for other free file programs. You must access the program through the government link in order to qualify for the free file, otherwise you will be expected to pay for the service.
Some states, like Illinois, will let you file your tax directly through their state website. You’ll have to prepare your federal tax return first, but then you can file your state. To find out if you qualify to the Illinois web-file, click on this link: http://tax.illinois.gov/Individuals/StudentQualifications.htm
In a case like that, you’ll want to do the IRS free file first. That link is:
http://www.irs.gov/efile/article/0,,id=118986,00.html?portlet=8
The IRS won’t have that site open until January 14th. But once it comes open, there will be a list of free file providers and the requirements for using the service. Generally, if your income is below $57,000 you should be able to find at least one service that will free file your return through the IRS website.
Do not forget to file a state return! I cannot stress that enough. After the federal filings are all in, the IRS shares the information on your federal tax return with the state listed as your home address. If you deserve a refund, the state will not notify you, and you’ll just miss out on receiving your refund. If you owe, you will receive a notice showing your balance due, plus penalties for not filing and penalties for late payment, plus interest due on the amounts owed. These notices will not take into account and deductions that you might be entitled to. It’s definitely in your best interests to file your own return and not take the state’s bill at face value.
What do you do if your income or other circumstances prevent you from using the free e-file programs? This is of course making the assumption that your tax situation is easy enough for you to file your own taxes. (You are reading this Blog on a professional tax preparer web-site, if you can’t prepare your own return really you should be calling me, right?)
My recommended for pay “prepare your own taxes” website is here:
Although much less expensive than having a professional prepare your return, this site is not free. It’s actually through Drake software. I use their professional version when I prepare income taxes for my clients. I like the online software because as new issues pop up, the software is updated constantly. You’re less likely to have tax return mistakes due to software issues when you use an online program. Also, the online programs will determine which forms you need, 1040EZ, 1040A, or 1040. The program will pick the easiest form you qualify for. You also don’t need a credit card, you have the option of having your fees withheld from your refund if you’d like. You can try it out for free, then if you choose to file with this program you can pay, otherwise just walk away.
What about the tax filing products that you buy at Sam’s Club and Office Depot? The tax return products in a box are generally good products IF you remember to download and install the latest updates before you actually file your return. If you fail to download and install your updates, those programs are close to worthless, especially this year with all the last minute changes made by Congress. Be sure to buy the program that’s best for you. Don’t buy the “basic” when you need the “premium.” Read the boxes carefully to determine what type of filer you are. If after looking at the examples on the box you honestly don’t know which program to buy, you should have a professional prepare your return.
One more tip for filing your own return: Many tax companies will, for a fee, review a return you’ve prepared yourself. I do it all the time. This is especially helpful for people who don’t feel 100% comfortable with filing for themselves or just if you have questions. It’s a low cost alternative to hiring a full professional service versus going it completely alone. Be careful though, some companies use that as a ploy to get you to purchase their professional filing services. They offer a cheap “review” rate then tell you you’ve missed something but won’t tell you how to fix it. Reputable companies will tell you what’s wrong, why it’s wrong, and how to fix the problem.