This year, file your own damn taxes. I know, you don’t want to, and Mom or Dad is happy to do it for you! So why should you do it yourself?
The thing is, you can learn a lot by filing your own tax return: “How much money did I make last year? Really? I made that much? Where did it all go!?!” “They take that much of my money for social security?” And my personal favorite: “Wow, being claimed as a dependent kinda sucks.”
It might be beneficial to try doing your taxes by hand, on the paper forms, but the government is actually discouraging that – they want everyone to e-file this year. That’s your choice, but online tax prep services offer a lot of things you might want to take advantage of. First of all, they offer easy guides as to which tax form(s) you should file. Secondly, they walk you through the whole thing step-by-step.
A lot of tax software has popped up, especially over the last few years. Make sure you pick a company you can trust, because you’ll be giving them a lot of personal information. Also, although the government lets you e-file for free, realize that you still may have to pay to file a state return, or to get additional features in the software you choose.
Keep in mind that if you’re attending college out of state, and you earned money in that state, you may have to file two state returns – one for your home state, and one for the one you worked in. I had to do this when I lived in California for a summer. So pay attention to what filing state returns will cost you.
2010 Tax Prep Costs (for your 2009 taxes)
TurboTax – Offers the Tax Freedom Project: free filing if your Adjusted Gross Income (AGI) is $31,000 or less, or you were active military duty (with an AGI or $57,000 or less), or if you qualify for the Earned Income Credit. Also includes free state filing for AL, AR, AZ, GA, IA, ID, KY, MI, MN, MO, MS, NY, NC, ND, OK, OR, RI, SC, VT, WV. Other state returns cost $9.95.
As I said, there are several more, and you should go with a company that you feel comfortable with. With that said, I always do my taxes on two or three different sites. Since reputable sites won’t charge you until you actually file, you can go through the whole process, and compare how your return looks with different services. It can also be a way to avoid mistakes or errors.
Most people live in the fear of the audit – when the Tax Man comes and says you did your taxes wrong, and now you (presumably) owe your first born child. You may be chosen at random for an audit, or there may be a “red flag” in your return that triggers one.
The best medicine here? An ounce of prevention. Fill out your returns honestly and carefully, and use a dose of over-cautiousness. Take your time, and you’ll be fine. Even if you are audited, it won’t be bad as long as you were honest.
None of this is to say that if you have a really complicated return, you shouldn’t use a tax accountant. If you’re one of many college students owning your own business, or you have some other severe complication, go for it.
This also isn’t to say you shouldn’t ask your parents for help and guidance. It’s perfectly fine to ask them to look over your return before you hit the “File My Return” button. Or even to have them sit there and talk you through it – that’s cool, too. It’s about being proactive about your finances, so that you will feel comfortable filing your own taxes for years to come.
Pro Tip: You can also find answers to almost every tax question ever at IRS.gov.