By following these simple tips, you’ll learn about the basics of how to prepare your taxes. Once you decide which path to take, you’ll find that even if it isn’t the most fun way to spend a few hours, tax return preparation doesn’t have to be the painful experience you may have expected. Here’s a checklist for figuring out the best way to get your tax returns prepared efficiently.
Tip 1: Gather all your records.
The best place to start in preparing your taxes is to have all of your records ready and available. Anyone who’s an employee should get a W-2 from their employer. If you have a bank or brokerage account, mutual funds, or other investments, then expect to receive a 1099 from each financial provider. These forms have all the basic information you need to complete your return, so make sure all of your accounts are ready and accounted for, and then you can move on to preparing your return. If you’re missing forms, then it’s usually smart to wait until they come in rather than plowing ahead, as you’ll likely end up having to duplicate work once the missing form shows up.
Tip 2: Decide how to get your return prepared.
Once you have all your forms together, it’s a good time to decide how to proceed. If you have a simple return with only job income, then doing your own return by hand may be perfectly viable. For more complicated tax-return preparation, specialized tax-accounting firms can give you the personalized, professional attention you need to make sure your taxes get prepared correctly. If you find yourself somewhere in between, then tax software can be a reasonable middle ground, as it often costs less than full-blown professional preparation yet has checks in place to make sure you don’t miss out on lucrative potential deductions. With Intuit Inc. (NASDAQ:INTU)‘s TurboTax competing against H&R Block, Inc. (NYSE:HRB), which offers both its own software and low-cost live tax-prep, you can play the two companies against each other.
Another option is to take advantage of free tax help from the Volunteer Income Tax Assistance program. For certain low-income or elderly taxpayers, trained volunteers will help you prepare your tax return and even file your return for you when it’s complete.
Tip 3: Get started on the right foot.
The IRS has a bad reputation for making everything more complicated than it needs to be, but in reality, it does an admirable job of condensing thousands of pages of legalese into usable information for taxpayers to follow. For instance, Publication 17 is a scary-thick, 292-page manual that would be just about impossible for anyone to read through. But just looking through the table of contents and index will show you where to get essential information, including which forms to file, where to get tax help, and even your rights if the IRS decides to audit your return. Moreover, with hyperlinks on the online format of the publication, you can easily get the information you need to get your tax return prepared, even if you decide to do it on your own.
