At the beginning of January, PT Money featured a guest post by Matt Robinson telling everyone to file their taxes on the cheap this year (a good read on how to save money on taxes). I saw it as a challenge to pay the minimum to do my taxes. This was my first time doing taxes, and since I don’t have a complicated situation, I began my journey by choosing TurboTax’s Federal Free Edition online. I could have chosen any company’s free federal filing option (H&R Block, TaxACT, etc.), but TurboTax was the first to pop into my head.
Plug and Chug
I gathered my W-2 form, 1099 forms, and student loan information and started plugging away. After spending 20 minutes answering easy questions and entering the amount on the W-2 and 1099 forms, it found $585 that I was going to be refunded. Sweet! I had adjusted my withholding in October, but even with 10 allowances, I wasn’t able to make up for the massive amount of taxes I had already paid.
I was given the option to file my state return online with TurboTax for $27.95, which sounded fairly reasonable considering that it asked me a million questions and automatically does the fancy calculations for me. I figured that trying to do my taxes by hand would take forever, but I was trying to save the money, so I had to at least try.
Free Resources to Save Money on Taxes
I found the state tax forms online through the state website, but using my paper and ink sounded like it was against the rules, so I started my journey of learning about all the tax resources available to me. The state website let me know that libraries have tax forms and that you can even request a mailing of the forms you need. I headed to the local library and learned another important lesson.
In addition to having all the tax forms, every year the library offers free tax filing help for individuals and families with low incomes. Technically I qualified because my half year income was below the threshold, but that seemed against the spirit of the rule.
I picked up the state return, and it was only one page. That’s it. I did have one question that I needed an answer for, so I headed over to the TurboTax Live Community, but none of the community answers left me satisfied. Then I found the best service ever. TurboTax is answering one free tax related question per person until January 31st. I typed in my question and minutes later received a call from Bob, who was extremely helpful and gave me the answer I was looking for.
All the figures I needed for the state tax form could be found on the federal return, which I was able to view online. I spent 10 minutes looking them up and writing them in the boxes. It felt like being back in 1st grade on a scavenger hunt, only easier.
They were going to charge me $28 for THAT? Those “fancy calculations” I thought they were going to do wouldn’t have saved me that much time after all. The most difficult part of the entire process was making sure I entered my name and bank information correctly (refund please!).
So I stuffed my state return in an envelope, stuck a $0.44 stamp on it, and put it in the mailbox.
Reader Challenge
I encourage those with relatively simple tax situations to give it a shot before going to a professional or spending money on expensive software. I challenge you to heed Matt’s advice and file your taxes for free. With all the resources out there, there’s no reason to pay someone else to do what is in reality a small amount of work. You’ll probably find that 10 minutes of your time is worth the $28 in savings.?
This is a guest post from Daniel Packer of Sweating The Big Stuff. Daniel writes about negotiating, budgeting, and currently saves over 50% of his take-home pay while paying off his student loans. To read more, subscribe to his feed or follow him on twitter.
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I have a pretty complicated tax situation, so I have an accountant. However, when I just had a regular 9-5, I always used those online services and I would literally be done in 15 minutes and have my refund within a week.
It is actually much faster to do it yourself than to gather the documents and give it to someone else. I mean, at 15 minutes, it’s probably less time than the drive to see someone!
I absolutely hate paying the over $100 to Turbo Tax for our LLC (partnership). But it’s the easiest way…anyone have any other suggestions?
@Moneyning I agree. It was extremely easy this year, but I anticipate doing the same thing for years to come because until I have a house, I don’t think it will be THAT complicated. The tax software is very good at determining your situation.
@MoneyNing – I think this year, I’ll rely on a CPA for the first time. Things got complicated with Grad School, Baby, etc. I’m sure he’ll help me to save money on taxes.
@MrsRefney – I’d check the rates of your local CPA. If your return isn’t too complicated, you might could get away with a $150-175 fee. Not much over the $100, and it’d be stamped by a pro.
@Daniel – Nice post. Thanks for offering up these tips. Especially the call for free advice hotline. Nice.
Great guest post! Shows how easy taxes can be in many situations.
My question is, at what point do you seek advice from a CPA? When you have an LLC, do itemization, multiple income streams, what?
I think you get a pro in two situations: 1. you’re in over your head, and 2. you think you might be leaving money on the table some how. Oh, and 3. you’re making so much money, you don’t need to be bothered with it.
I just pay my accountant his fee and don’t worry about it. He finds all the deals and gets me the max back. I will never do my own taxes again and haven’t now for 4 years.
You can also check post offices for free copies of state and federal tax forms.
I think this is pretty good advice. For years I spent unnecessary money on a simplistic tax situation.