The Mercury News Weekend
Many online tax preparers offer variety of help
A lot of Americans prepare their taxes online or via software using services like TurboTax, TaxAct, H&R Block and others. Some of these services use software you buy on a CD or DVD, others are online and some offer both options. And the IRS has a free-file program that lets tax payers with an adjusted gross income (AGI) of $73,000 or less file for free.
For those not eligible for free-file, each company has its own rules and pricing, but TurboTax, the most popular service, gives you a choice between doing your taxes on the web or purchasing the software. If you use the online service, you'll pay separately for each return you file (unless eligible for a free return). If you purchase the software the price includes preparation and printing of unlimited federal tax returns and e-filing of up to five federal returns, which may be more economical for some families.
If you purchase software (versus using their online service) make sure you're getting the right package. TurboTax, for example, has different pricing depending on the complexity of your returns, ranging from free for online preparation of simple returns to $119 for those with business income and other more complex scenarios.
One advantage to TurboTax and some other programs is their ability to pull in data from online sources such as banks and investment companies as well as your W2 forms from some employers. This not only saves time, but eliminates a lot of potential errors, including simple typographical mistakes when entering numbers.
If you think you qualify to take advantage of the IRS's free-file program, you can find out more, including confirming if you're eligible, at IRS.gov. If you use a search engine to find the free-file site, make sure you go to the IRS site first, which will direct you to an authorized participating tax preparation site.
One thing I like about TurboTax is that you can start for free and only pay when it's time to either print or e-file your return. As you enter your information, the system may try to upsell you, especially if it detects you have a complex return. But it will also offer you extra features like audit support or even having a professional do your taxes for you.
Even if you rely on a professional to prepare your returns, you may want to take advantage of a free service from TurboTax. You can start entering data for free and pay only when you're ready to file. I'm using a CPA this year, but I'm still going through the process of entering my data into TurboTax to take advantage of a feature that tells me what I owe or will get back based on what I've entered so far. I don't plan to pay to have it printed or filed for me, but am just using it to get an estimate of what my federal and state taxes will be this year. Even though I'll have to pay a CPA to file for me, it's giving me a better sense of how certain scenarios will impact my taxes, which should help me when I'm finally ready to work with my accountant.
Using tech to gather your data
Whether you do your own taxes or rely on a professional, you'll still need to gather data, and there are plenty of tech tools that can help. Nearly all investment companies and some banks give you online access to 1099s that report interest and dividends. Most will also mail you forms, but I always worry I might miss seeing an important piece of mail, so I often download my forms instead of relying on the mail. You can also go to the DMV to find out how much you paid in car licensing, and if you're a home owner, go to your county's tax collector's site to find out how much you paid in property taxes during the tax year.
Some years I deduct office and travel expenses, which I'm able to capture from my bank and credit card online sites or via Mint — a free service from Intuit, that can be programmed to automatically capture data from most banks and credit card companies. I can export my Mint data to a spreadsheet and use either Excel or Google Sheets (a free online spreadsheet) to sort and analyze my expenses by both date and category.
My CPA has his own online portal that allows me to upload documents including 1099s and W2s. In most cases, I just send him files I've downloaded, but if need be, I'll scan them and send him a JPG or PDF. If you don't have a scanner, you can use your phone to take a picture of the documents.
For many taxpayers, using tax software or an online service is just as easy or perhaps even easier than using a professional, especially if you don't run a home business, have rental income or have a complicated investment portfolio or other factors that make it harder to do your taxes. Right now, my taxes are a bit complicated, but when they weren't, I found it much easier to enter my data in TurboTax then it was to fill out the forms my CPA needed so that they could prepare my taxes. Plus, by doing it myself, I had a better handle on my situation as well as my income and expenses.