Know Your Tax Filing Options

Know Your Tax Filing Options

Eileen St. Pierre, The Everyday Financial Planner

Tax filing season began on January 20.  In 2014, over 86% of returns were e-filed according to efile.com  – over 46 million of us prepared and e-filed our returns ourselves.  If you do plan on having your taxes done, make sure you know your tax filing options before you shell out money to a perfect stranger.

Don’t forget about VITA

For those making $53,000 or less, you can get your taxes done for free at a VITA (Volunteer Income Tax Assistance) site.  IRS-certified volunteers provide free basic income tax return preparation with electronic filing.  Some sites offer assistance in Spanish and other languages.  To find a VITA site in your community, use the IRS VITA Locator Tool or call 1-800-906-9887.

E-Filing Options

You have four basic options if you choose to e-file:

  1. For those with an adjusted gross income (AGI) of $60,000 or less, the IRS offers a special Free File program.  Free software is provided by the members of the Free File Alliance, a consortium of 14 tax preparatory firms including H&R Block and Turbo Tax.  You don’t actually download the software.  Instead, you are linked securely to their site.  Then the software takes you step-by-step through the process, building your return for you based on your answers to specific questions.  If you qualify for this program, choose a provider from the list that also offers free e-filing of your state return.
  2. Regardless of your AGI, anyone can use online fillable forms that are electronic versions of the IRS paper forms.  You can then e-file for free.  This option is good for those who want to fill out the forms themselves, but get their refunds faster.  However, this system does not support state tax returns and only does basic calculations.
  3. If you don’t qualify for the Free File program and you want to prepare your return using tax software, you can always buy your own software.  E-file through your software vendor’s secure channel (don’t email it).  Make sure you do your homework before purchasing software.
  4. Finally, you can e-file through a paid tax preparer.  All tax preparers are now required by law to e-file unless the preparer expects to file less than ten returns in a calendar year.  Always remember that you are ultimately held responsible by the IRS for what is on your tax return – ignorance is not a defense.

Identity Theft

E-filing has also become popular with identity thieves.  They use stolen Social Security numbers and other information to file fake returns and collect the refund that was supposed to go to you.  Taxpayers don’t realize they are victims until they try to file their taxes and find someone else has already done so before them.  Here are some tips to avoid this type of identity theft:

  • If you pay to have your return done, only use qualified tax preparers – not your neighbor’s nephew who’s really good at math.
  • File your return as soon as possible.
  • Make sure the computer you are using is secure.  Store your return data on a flash drive and store it in a secure place.
  • Do not carry your Social Security card with you and do not give anyone your number unless absolutely necessary.

It’s still safer to file your taxes online than by mail.  Of course, the easiest way to protect your data is to do your taxes yourself!

Visit my Taxes page for podcasts and other information.