Believe it or not, there is a right way and a wrong way to do your taxes. More importantly, though, there is a way that's right for you. How do you know which path to take during tax season to avoid a flurry of paperwork from the IRS? It depends entirely on your situation.
Your decision on which way to go with your tax prep should hinge on a few different factors. It's also important to consider the methods available to you before you file. There are several ways to go which, unfortunately, also creates a lot of room for potential error.
If you're ultra-traditional, you might be inclined to fill out the actual paper form(s) needed to file your taxes. And while this is still an accepted method of filing, it's not recommended for most people. First, transcribing figures by hand makes it easier for you to make an error (such as transposing numbers or filling in the wrong box). Second, the turnaround time on any refund will likely be longer than other methods. Finally, returns moving through the mail are sometimes targets for tax fraud. So, unless you simply want the practice of filling out the forms before you actually file, choosing a paper return won't make much sense for you.
You may be among the vast number of Americans who benefit from filing online. The process is relatively secure, returns are typically processed in a timely fashion and you don't have to leave the comfort of your home. Additionally, there are a number of free programs available to you online. There are just a few questions to ask first. Were you a contract employee last year, possibly dealing with multiple 1099's? Were you running your own business? Do you have special deductions or credits that you need to take? If you answered ‘yes' to any of these questions, you may not want to attempt filing on your own. But if you received a W2 and have a straightforward return ahead of you, explore your online options and save yourself some money.
Let's say you have a complicated tax return this year or, perhaps, you're simply not confident in your filing abilities. Either way, a professional preparer can be a valuable ally to have during tax season. Whether your professional was referred to you by a friend or someone you found on your own, make sure you do plenty of research before proceeding. A tax preparer recognized by the IRS will have a Preparer Tax Identification Number (PTIN), which you should ask for. Read any available online reviews and find out how many years they have handling taxes. Selecting the right person to help you is a matter of patience and thoroughness, but will be well worth your time and, ultimately, your money.
When it comes to your taxes, preventing mistakes is so much easier than correcting them. Nevertheless, if you find yourself with a tax debt after you file – no matter which method you chose – make sure you consult with a licensed tax professional. You can rest assured that once a problem exists with the IRS, speaking with a professional is always the right course of action.