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Tax Return Preparation

Almost every U.S. resident who earns at least some income must file a federal individual income tax return every year. Unfortunately, the U.S. tax code is highly complex. Many taxpayers are uncertain whether they should prepare their own taxes, pay for tax software, or hire a professional.

In the following sections, we will explain the basics of tax return preparation to help you decide whether to prepare your own returns or turn to a tax professional for help.

What Are the Filing Options?

When you file your annual federal income tax return with the Internal Revenue Service (IRS) you have several options.

Paper Filing

While it has become easier and less expensive to e-file in recent years, millions of Americans still file their taxes by filling out a paper return each year and mailing it to the IRS. While you can still manually fill out the forms using a pen, most tax forms are available on the IRS website as fillable PDFs that allow you to type in the necessary information and print it out.

If you choose to prepare your returns, you can take advantage of the IRS's Volunteer Income Tax Assistance (VITA) program. VITA offers tax help to people who make less than $60,000 a year, have disabilities, speak limited English, or otherwise qualify.

Free File

Taxpayers and families with a total adjusted gross income for 2022 of $73,000 or less are eligible to electronically file a tax return for free using tax preparation software provided through websites partnered with the IRS. The advantage of free federal electronic filing is that the software will guide you through the preparation process and do all the math. A list of free file partners is available on the IRS website.

Paid Software Products

If you don't qualify for IRS free file and want to use online tax preparation software to guide you through preparing and filing your return, TurboTax and other providers can help. The software can also help you through some complex tax situations. It can also help if you are self-employed or own a small business. While these sites will charge you for using their software, many will let you pay for their services using your tax refund (if you receive one).

Tax Professionals

You can always turn to a tax professional if you are uncomfortable preparing your return or have complex financial or tax situations. The term "tax professional" covers a broad range of tax preparers, from the tax part-time help in the local tax office who has had some training in basic tax concepts to tax attorneys and CPAs who can address any personal or business tax situation you might face. So before you turn to a tax pro for help, ensure they have the qualifications.

One significant disadvantage of using a tax professional is that you must get your tax information to them well before your filing deadline so they have time to prepare your return.

Considerations When Choosing How to File

When you are deciding how you should prepare your taxes, you should consider the following questions addressing issues that may complicate your return:

  • Are you claiming the standard deduction or itemizing? Claiming the standard deduction simplifies the tax preparation process, whereas claiming itemized tax deductions requires understanding what is deductible, collecting the relevant records, and reporting the necessary information to the IRS.
  • Are you claiming the earned income tax credit? The earned income tax credit provides financial help to certain low-income taxpayers. However, the calculations used to determine eligibility are so complex that even tax professionals sometimes have trouble with them.
  • Do you have a complicated dependent situation? Benefits like the child tax credit are available to taxpayers with children or other dependents. But, it is not always clear who can claim someone as a dependent, and the IRS rules can be challenging to apply.
  • Do you have business income? If you are self-employed or own a small business, you will probably have business expense deductions that you must report correctly. You must also calculate and pay self-employment taxes and quarterly tax payments.
  • Do you have enough money to make your tax payments? If you don't, you need to work with the IRS to set up a payment plan, negotiate an offer-in-compromise, or work out another arrangement.

What Information Do You Need?

Whether preparing your taxes, using tax preparation software, or relying on a tax professional, you must collect some information to file your return by the due date. You should have the following tax documents available:

  • Your Social Security number or tax identification number
  • Form W-2, Wage and Tax Statement
  • Form 1098, Mortgage Interest Statement
  • Federal income tax returns for last year
  • State tax returns for the current tax year
  • Bank account information
  • Documentation of childcare expenses
  • Information on distributions from IRAs or other retirement plans
  • Any Forms 1099 you may have received reporting payments you received
  • Form 1098-E, Student Loan Interest Statement

Let a Professional Help You With Your Federal Tax Return

The tax code is one of the most complicated sets of laws in the American legal system. If you have concerns about preparing your tax filings, a qualified tax lawyer can help protect your assets while ensuring you stay on the right side of the law. Contact a local tax attorney who can help you navigate the tax code.

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Next Steps

Contact a qualified tax attorney to help you navigate your federal and/or state tax issues.

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