8 Ways to Save Money on Federal Tax Preparation
- Know Your Tax Situation – This is the most important tip that I can give. Understand the basics of your tax situation (do you itemize, # of deductions, # of exemptions, filing status, etc). This will make it easy for you to compare prices of either a professional or software.
- Do it Yourself – If your tax situation is simple enough, then you can save money by preparing your own return. You have more options than sitting at your desk with a #2 pencil for 10 hours straight (see below)! Learn if you should file yourself or use a tax professional.
- Free File – The IRS has contracted with a number of companies to provide certain taxpayers with free electronic filing of their Federal tax return. There are income limitations, but they are pretty generous. Just enter your information here, once you are ready to file, to see if you qualify. Here’s how to file taxes online for free.
- Know Your Limits – If your taxes are complicated or you aren’t comfortable with doing them yourself, please don’t try to save a couple of bucks and get yourself into hot water with the IRS! Paying a preparer is much cheaper than going through an audit!
- Start Early – Be prepared to file your taxes during the first or second week in January if possible. You might be able to get a cheaper price from your preparer since he won’t be as busy as he is in March/April. If you wait until the peak of the season, then you may have to pay a higher rate (and wait longer).
- Be Organized – If you want to save money on your tax preparation (and help your preparer avoid unneeded frustration), please be organized. If you are charged an hourly rate and your preparer has to sift through a box of receipts and unopened mail, then you will pay a fortune! Even if you are charged a flat rate for certain services, once your preparer has to do a lot of detective work, your costs will skyrocket!
- Split the Costs – The major desktop tax prep software allow you to prepare multiple returns per license. Also, some professionals (including me) will offer discounts for more than one return.
- Find a Volunteer – Both AARP and the IRS offer volunteer tax preparation for seniors. The IRS also has a program in place for low-income taxpayers as well.