Tax day, April 15, can creep up on you like a bad case of acne. Most people don’t like to deal with taxes, but if you are proactive about filing and paying your federal and state income taxes you can make the experience less unpleasant. Once you have received your last pay stub from your employer, if it shows your cumulative gross income and federal and state withholding, you may have all that you need to get started. Employers and investment companies are required by law to mail year-end statements by January 31.
The best advice is to make no plans the weekend of February 7, 2009, and get your taxes started and finished. After all, if a refund is coming your way, you’ll get it much sooner than if you had procrastinated. And if you owe money, you can still wait until April 15 to pay it. Do you realize that if you obsess about taxes until mid-April, you’ll have wasted nearly 30% of the year worrying needlessly?
If you expect a refund, especially a large one, don’t fool yourself into feeling admiration for the generosity of the United States Treasury Department. That money belongs to you. You would be wise to claim a larger number on your W-4 form for 2009, so that your paychecks are larger and your refund is smaller. Get yourself over to the Human Resource person at work, pronto!
So, who will prepare your taxes this year? Did you file taxes last year? How did they get filed? Were you happy with the results? State tax forms are typically simpler than federal, so make your decision based on your comfort level and confidence to file your federal taxes. By the way, if Mom and Dad claimed you on their taxes, then you can not include yourself as an exemption (your exemption would then be “0”). Here are some of your choices.
1. The cheapest way to get taxes done is to do them yourself. If you only have one W-2 form, your IRS form 1040, 1040A, or 1040EZ might be simple. Use last year’s form as a guideline for completing this year’s taxes.
2. Free help is available to you in a couple of ways. Call or go to the Internal Revenue Service office and ask your questions to the IRS staff. There is also a program called VITA (Volunteer Income Tax Assistance) sponsored by the IRS which helps low income people with tax preparation. You, as a student, or young employee may qualify for this service.
3. There are excellent software and web-based tax programs for your home computer that have excellent reputations, such as Turbo Tax, Tax Cut, and Tax Act. Turbo Tax has four different products, ranging in price from $22 to $80 that you can purchase. Select the correct product based on the complexity of your tax situation. Turbo Tax can also be accessed online at a discount, $11 to $56, through brokerages such as Fidelity. People of all ages rave about how easy Turbo Tax is to use. Tax Cut is the online program from H & R Block.
4. Discount tax services such Jackson Hewitt and H & R Block are a good choice for tax preparation if you feel lacking in confidence for doing it alone and want help from a real person. Prices start at approximately $100 for a simple return and tend to be more expensive in the larger cities. Be sure to mention if you are a student, as there is often a discount of as much as 20% at these places. They are often located in a mall or inside one of the large retailers such as Wal-mart. Be very careful not to agree to a loan that it is related to your tax refund. The interest rate will likely be ridiculously high. So, this is NEVER a good deal, at least for you it’s not!
5. Professional tax preparers can be found in your phone book or Internet search. It is probably best to select someone who comes with a personal recommendation from someone you know.
6. If your tax situation is especially murky, perhaps you inherited a substantial amount of money or started a business which has equipment that depreciates; it may be worth spending the extra money to hire a certified public accountant (CPA). These are experts who understand taxes and the law. Plan to spend at least $200 or more likely as much as $600 depending on how complicated your tax situation is.
Always remember, that when it comes to having your taxes prepared, you usually get what you pay for. Assess your situation NOW. Organize and gather all your tax-related documents NOW. Make a solid plan NOW as to who will prepare your 2008 taxes.