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Preparing U.S. income tax return by yourself

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Published: Mar 18, 2011    Updated: Jul 22, 2011    Views 3889    Comments 0
This article is also available in: Polski

Find out how you can prepare income tax by yourself and file it for free or inexpensively.

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Some people have a perception that filing income tax is complex process or it must be done by a tax professional. For individuals with a single job, or even multiple jobs, but no other types of income and simple deductions, this is fairly simple process. Tax professionals can charge upwards of $100 dollars for such simple tax returns, not to mention more complex returns. Whereas you can do it yourself for free or at least for a fraction of the cost, depending on how you decide to file.

I agree that for some people it may be beneficial to pay for services of tax accountant, especially when their taxes include rent or business income. Also people with English as their second language may be in a disadvantage here. However even with these more complex tax returns you may be able to prepare a tax return all by yourself. The tax software and their online versions are very user friendly and convenient. They guide the preparer through the tax return step by step hiding the complexity of the actual tax forms.

So, first, gather all of the documentation that you received in mail and that you have collected throughout the year. Most of the documents you receive in the mail in January to February period need to be claimed on the tax return, such as documentation for your work, form W-2 or 1099-MISC. You may also receive form 1090-INT for the interest you earned on your savings account. If you own a home and pay mortgage, you will receive documentation for your expenses on a form 1098-INT, for interest you paid on your home mortgage or home equity line of credit. Also look for a postcard size mailing with an amount you paid for a property tax. This should also be indicated on form 1098-INT.

Once armed with all your tax documentation you may start preparation of your tax return. Regardless how you eventually file, I would suggest creating a test tax return on one of the online services, which let you do that for free. Creating tax return does not mean you are filing it to IRS. You may experiment with all of the services to find the one that you like, and most importantly understand better. If you have very simple tax return such as only income reported on W-2, then you may be even able to file at no cost.

If you’re up for some little more challenge you can prepare your return manually directly on the forms. The forms are publicly available and can be downloaded for free from IRS website; filing itself is free as well. You will need to select the correct form for filing your return. Every form is accompanied by corresponding instructions, which help you select correct filing status and include explanation for filling out the form. Selection of appropriate form depends on several factors, such as your US residency status, whether you’re claiming dependents, deductions and other types of income.

The bottom line is that you are not obligated to spend a fortune on a tax accountant for something that will take about half an hour to an hour of his time. It will definitely take you longer than that the first time, but the next year it should be a breeze. And if you decide to use the same online service next year, your information is transferred to next year return making it even easier. You have nothing to lose besides some of your time, and you will be glad you did it yourself and saved that extra cash. Think about this as your extra income tax refund.
Resources
1. Federal Income Tax Forms and Publications
2. H&R Block
3. TaxAct
4. TurboTax
About the Author
Henry Limowski is a freelance writer who shares his knowledge about personal finance and business catering to Polish community living in the U.S. He is dedicated to spreading financial awareness to help people save money. He's the president of QUELL Technologies, LLC, a parent company that owns PodatekDochodowy.com and AmigoLife.com among others.
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