by Bill Snyder

Say Goodbye to Expensive Tax Preparation Software

Mar 01, 20123 mins

If your taxes aren't too complex, the IRS offers free electronic forms you can fill out and file yourself. The feds will even hook you up with a private company to help fill out those forms. The cost? Free.rn

It’s the beginning of March, and I haven’t started to collect my receipts for 2012. Well, I have a year to worry about taxes on this year’s income. But it’s probably time for me to take my head out of the sand and get ready to give the feds and California’s Governor Brown a chunk of my hard-earned change.

As I face this unpleasant reality, I need to decide whether I should continue to work with Ralph the accountant or finally take the plunge into online and desktop tax preparation software.

If I do decide to go my own way, do I really want to give those Yuppies down in Silicon Valley cash to pay for their tax preparation software? Hmm. Probably not. 

Over the years, the number of major vendors that make this type of software has dwindled to three: TurboTax, H&R Block at Home and TaxAct. (Yeah, there are a few more, but those are the big guys, and if one of the smaller players is ticked off because I didn’t mention them, my email address is at the bottom of this post.)

So how do you file your own taxes for free? Let’s get started.

The first choice, and I think it is a no-brainer, is to decide to file electronically. If you haven’t been doing that, you’re wasting lots of your own time. And if you qualify for a refund, you’ll get it a lot faster this way. Taxpayers in 37 states and the District of Columbia can file their federal and state returns in one transmission to the IRS, which makes it even easier.

Second question: If you decide to file electronically, do you need to buy tax preparation software? No, you don’t. The IRS now offers free, electronic versions of Forms 1040, 1040A, and 1040EZ to all taxpayers, regardless of income. They are available through the Free File section of the IRS website.

Want help with that free software? If your household’s 2011 adjusted gross income was $57,000 or less, go to that Free File section to learn how you can work with a company listed as an “e-file partner” on the IRS website — for free. Some of those companies charge for help with state taxes, and some don’t support all of the forms you may need to file. But, hey. It’s free.

Suppose I make more but don’t way to pay? If your situation is fairly basic, the three major software makers I mentioned all offer free online filing for forms such as the1040, 1040A and 1040EZ. According to the good folks at Consumer Reports, “TaxACT offers the widest array of IRS forms and schedules that can be prepared and filed for free.”

Even though I’m single and my kids are grown, my tax situation is a bit complex because I’m self-employed, take a home office deduction, have an investment portfolio, and lots of business expenses. Several of those situations are audit-magnets, so I’ll be thinking hard about how I handle my taxes this year. Free is good, but audits and missed deductions are bad.

So if your taxes are complicated, free might not be right for you. But for many of us, it is, so why not check it out?