According to IRS
statistics, 70 per cent of taxpayers filed returns electronically last year, either directly online or through a third-party tax preparer.
The do-it-yourself route of filing your taxes online is certainly cheaper. And in some cases, there may be no cost at all. Particularly if you earned less than $50,000, it is probably worth your while to start your online tax return at www.irs.gov, clicking on “Check Out Free File”. This will lead you to a number of online tax return services that offer free filing for some taxpayers. Read the requirements for each return service carefully, however, and be aware that the more complicated your return, the more likely you will not be eligible for free online filing.
Among the more easily recognized online tax services is H & R Block’s, www.hrblock.com. Depending on the type of forms required, your federal tax return can be filed here for between $5.95 and $29.95. More complex returns may be charged extra. But these fees are strictly for the process of filing your return. If you want a professional tax preparer to sign your return, that will cost you $79.95. And all of these prices are for your federal return only. If you also want to file your state and/or local tax return, you’ll be charged extra.
Another popular online service is www.taxfreedom.com, the site run by Intuit, the makers of TurboTax software. Downloadable software, which includes free e-filing, is available from $9.95 (if you are mostly importing last year’s data) to $19.95 (if you are starting from scratch or don’t have last year’s data stored electronically). There is an extra charge, again, for state and/or local returns.
Even if you know you won’t qualify for free electronic filing, visiting the IRS web site at www.irs.gov and reviewing the other companies offering free electronic filing isn’t a bad place to begin your search for the right electronic filing company. Each service is slightly different in terms of its emphasis, sophistication, and ability to handle more complex returns, so starting with those at least partially vetted by the IRS seems like a logical first step.
Regardless of which company you choose, however, a few general caveats should be heeded. Most services are providing the ability to file – only – so it is extremely important that you understand how or why the software calculates your taxes. If, at the end of the process, you have a tax return with no clear understanding of how the software calculated the tax owed, deductions, or your refund, there could be problems. If you are ever audited, it will be up to you, in most instances, to justify the actions taken, even if the software made the decisions and calculated the numbers for you. It may sound counter-intuitive, but adding up your tax numbers by hand, on paper, to get a rough idea of what the final return should look like, is recommended. You may also want to take notes during the e-filing process, noting explanations or calculations that are made so you have a record of how various numbers were generated.