How Much Help Do You Really Need With Your Taxes?
Taxes dominated the final months of 2017, to such a degree that no one will blame you if you don’t even want to think about them as we head into the 2018 tax season.
Well, too bad. As Ben Franklin famously noted, it’s still one of the two life certainties it’s impossible to escape. But that doesn’t mean you need to call up a pricey accountant to get your taxes taken care of. Here’s a cheat sheet to help you figure out, based on your tax situation, how much help you really need to get the job done.
Simple and Straightforward: File for Free
The Scenario: You’re a filer with one or more W2 forms from employers, some savings account interest, a few stock dividends. Lacking any significant deductions, you’re planning to take the standard deduction.
The Plan: You’ll likely be filing a 1040EZ or 1040A form, and it’s very possible to do your taxes for free. Just note that some tools are “not as free as you think” because they sell user data, says Ed Slott, CPA. (Other companies offering free tax software use your information to recommend credit cards, loans or financial strategies.) Your options include:
- The IRS’ Free File tool is available to those who make less than $66,000 a year in adjusted gross income. For those who make more, there are free, fillable forms—and instructional how-to videos from IRSvideos.gov. Some state tax departments also offer free online filing tools.
- Credit Karma Tax is a free filing service with a 24-hour live chat—but the company uses your information to make recommendations and send you offers from their partners.
- H&R Block More Zero is also free. It offers live chat support and covers tax situations like donations, mortgage interest, retirement plan income, and student loan interest.
- TurboTax Absolute Zero and TaxAct Free are—like the others—free tools aimed at those filing federal 1040A or 1040EZ forms and state returns. (Note: According to TurboTax, for their Absolute Zero tool, they don’t sell/share user information or use it to make offers from their partners.)
- If you’d prefer in-person filing help, try the AARP Foundation Tax-Aide, which offers free tax prep help to anyone in over 5,000 locations, regardless of AARP membership status. After giving one of the volunteers your tax information, “your return is prepared right then and there, and it is electronically filed on your behalf,” says Julian Block, a tax attorney in Larchmont, NY.
Middle-of-the-Road: File for Under $100
The Scenario: Your scenario has a few twists and turns, but nothing that would make an accountant think twice. Perhaps you itemize your deductions, or you own your home, or you’re self-employed with minimal expenses (like a consultant or freelance writer).
The Plan: You’ll likely be filing a 1040 form and maybe a schedule C form if you’re a member of the gig economy (Uber driver, freelance writer, or even own your small business). You’re the perfect candidate for a paid-for piece of tax software. You should be able to get the whole thing done for under $100. And don’t fret that you might be missing out by not going to a tax professional; as Block notes, “the person you pay to prepare your return uses tax software.”
Your options include:
- TaxAct offers a “Plus” option for homeowners, itemizers and filers with investments ($17.50), as well as a “Freelancer” service for independent contractors or self-employed filers ($27.30). The company charges an additional $37 for filing your state return.
- H&R Block offers “Deluxe” online filing for homeowners and itemizers ($34.99), as well as a “Premium” service for investors and property owners ($54.99). At H&R Block, state returns are an additional $36.99.
- Finally, TurboTax offers a “Deluxe” version for itemizers ($39.99) and a “Premier” version for those with investments and rental property ($59.99). The company charges an additional $36.99 for state returns.
Note: If you’d like to check your work, you can prepare your return on multiple platforms, then compare the results. (Most won’t charge you until you file and submit.) The return amounts should all read the same—if not, it’s a good idea to go back and see where you went wrong. Once you’ve figured it out, you can pick the platform that offers you the lowest price to file. If you’ve prepared your return but still have questions, or you aren’t sure you’ve done everything correctly, you have the option to take your prepared return to a tax professional and ask them to review it. The reduced fee they’ll charge could be about 25 percent of their normal fee, says Block.
It’s Complicated: Prepare to Pay (But Not Necessarily That Much)
The Scenario: Maybe you’re a small business owner or a partner/owner in a large business. Maybe you had a qualifying event this year (like a marriage, divorce. or home sale). Maybe you have a lot of income from investments or you rent out the property. In other words…your tax situation is a bit complicated.
The Plan: You’ll likely be filing a 1040 form, plus some other forms—including, perhaps, a schedule E form (if you rent out property or you’re a company shareholder or partner). You can still keep the price very low if you’re comfortable with online filing—perhaps with some live on-demand help—or you can hire a specific person for filing. Your options include:
- Some tax software companies offer self-employed filing services for small business owners. H&R Block’s costs $74.99, and TurboTax’s $89.99. The latter also offers TurboTax Live, a new service for one-way video chatting with a tax prep expert or registered agent. (It costs $149.99 and includes all the features offered in TurboTax Self-Employed.) Users can either rely on available experts for supplemental questions or have an expert prepare a return on their behalf.
- A tax prep service like H&R Block is a viable option when you’d like to plan for next year and look at how new tax legislation could come into play (for example, are you looking for the highest possible take-home pay, or would you rather have a large refund?) They specialize in looking at how your tax situation changed this year and how that might affect you next year, says Lynn Ebel, a tax attorney with the Tax Institute at H&R Block. The company offers free options for federal returns, and outside of that, price varies based on individual and forms required, averaging around $220.
- You might want to go with a CPA or Enrolled Agent if you’re building your own business, as these individuals have experience preparing both individual income taxes and advising businesses as they develop. They’re also a good option if you have a complicated portfolio of investments. But it won’t come cheap: Iliana Malinov, CPA and director of tax services at HLB Gross Collins (a full-service CPA firm in Atlanta), says that complex individual returns start around $1,500 and go up from there. That might sound steep, but if your income is high enough and your taxes complicated enough, it may be worth it.
With Hayden Field