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Home  > Article

Dollars and Sense: The IRS Made Easy

By Bruce Gottlieb

There are a variety of tax preparation options out there and some are quite painless. It just depends on how much time and money you want to spend.

 
The 1040-EZ is a junior varsity version of the standard tax forms
 

How should you file your federal taxes this year? To some, this may sound as cheery as asking a condemned man how he'd like to be executed. But we like to think of ourselves as the bearers of happy, as well as useful, news.


The Dread 1040
The cheapest and least friendly option is to use the IRS forms. This is how your grandfather did his taxes. And he probably complained bitterly about it each April before mailing them off. The IRS forms have an unparalleled reputation for being needlessly difficult and intimidating. Truth be told, the IRS forms actually aren't that bad especially if your income is mostly from wages (as opposed to investments or your own business) and if you earned less than $50,000. In that case, you probably qualify to use the 1040-EZ.

The 1040-EZ is a junior varsity version of the standard tax forms. The form is just one page long and is designed for people whose finances are pretty simple. Filling out the 1040-EZ will probably take you only a few hours.

You can download the form from the IRS web site (www.irs.gov), or you can pick up a booklet containing the form and a set of easy-to-follow instructions at your local library or post office. This booklet will tell you whether or not you qualify for the 1040-EZ.

If, however, you were fortunate enough to bring in more than $50,000 last year, you have to use the standard tax form the 1040, which you can also download from the IRS web site or pick up at your post office or library.

The more complicated your finances, the more difficult it is to fill out the form. If you made just $50,001 last year from your job, you don t have many investments, and you don t have a lot of complicated deductions, then it s snap. You'll just have to fill out a few boxes saying whether you're married, how much money you made, and so on, and then look in a chart to see how much you owe. But if you ran your own business (freelance journalism, for instance), gave a lot of money to charity, or own your own house, then it can get a little complicated. Nothing you can't understand, of course, but figuring out which forms to use for which expenses will probably take a few weekend afternoons.

TurboTax
Several software packages allow you to duck a protracted struggle with the standard IRS forms. The leading program is called TurboTax (MacInTax for Macs); it's produced by Intuit, the makers of the popular Quicken personal finance software. A CD-ROM containing a no-frills version of the program can be ordered at the company's web site (www.turbotax.com) for $29.95 (or, for the same price you download it). The firm also sells several deluxe versions of the program, containing more sophisticated features and more detailed help functions.

TurboTax uses the so-called interview format. That is, the program asks you a set of questions in plain English (e.g., Are you married? How much money did you make in wages last year? Do you own a farm? ). The program then translates your answers for the IRS forms. All you have to do is assemble the forms that your employer, bank, and broker send you at the end of each year, as well as last year s tax forms, and type in relevant figures as the program asks you for them.

At the end of the interview, TurboTax tells you how much you owe the IRS (or how much it owes you) and allows you to print out a set of forms. All you have to do is write out a check and mail the forms to the IRS. What s more, for an additional $10 you can transmit this information directly to the IRS using your computer's modem, thereby saving yourself the hassle of a trip to the post office. The biggest advantage of electronic filing, however, is that you'll get your refund in three weeks, according to the IRS, rather than the customary six.

Many people have grown very fond of TurboTax. It is, in fact, very easy to use and quite affordable.

A Personal Accountant
There are a variety of storefront accountancy firms such as H&R Block that will prepare your taxes at an affordable cost. Just call your local branch for an appointment (call early!) and show up with your receipts, bank forms, last year's tax returns, and paycheck stubs, and they ll do the rest.

Costs vary depending upon how complicated your return is and the particular outfit you choose. Expect to pay around $100 for an ordinary return. Reputable firms like H&R Block will tell you up front how much the whole shebang costs; they'll also guarantee their work, meaning that they'll bear the cost of any mistakes and shelter you from the infamous IRS auditors. Whatever method you choose for filing your taxes, you'll be happy when it s over.







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