How to file your taxes

Posted on March 10, 2008 in News
By Matt Dodge

Tax season is upon us. With April 15 looming ahead, it’s easy to get overwhelmed with talk of W-2′s, 1040′s, and other number-letter combinations of seemingly endless paperwork.

Most students avoid the “pen-and-paper” route towards their federal income taxes, opting increasingly for tax-prep software, e-filing, and online preparation. Some are cheaper than others; some are free. Some you can do yourself; some let you hand the whole business over to a pro. A few get you your refund in less than two week.

In the coming weeks, as you prioritize between dealing with taxes, spring break, and all those assignments that have started piling up, remember that although the IRS is a little less lenient than your professors, you still have a lot of choices for filing your taxes.

E-Filing

A new service offered by the IRS, e-filing is the online alternative to the pen-and-paper method. The instant Internet filing method means a quick refund, with most taxpayers receiving their checks within two weeks.

Cost: Free

Tax Preparation Software

These easy-to-use computer programs allow for tax preparation at your own pace. They help avoid daunting paperwork through a friendlier interface. Make sure to buy the latest version, as tax law changes year to year. Some of the more popular programs include TurboTax 2007 and TaxWise 2007.

Cost: $20-$80

Professional Tax

Preparers

These services vary greatly, from small local firms to franchise operations like H&R Block. If financial events in the past fiscal year (inheritance, marriage, purchase of a home) threaten to complicate your filing, it might be time to go to the pros. Students could be turned away by the high cost of professional tax preparation, but security and accuracy is often guaranteed by the company.

Warning: companies that offer “instant refunds” are often actually giving you a loan, that should be repaid as soon as your actual refund arrives to avoid high interest rates.

Cost: $100-$300

Online Tax Preparation

Many websites offer online tax prep. These services are similar to tax prep software, but are internet-based. Several sites offer “free” tax prep for taxpayers filling out 1040, 1040a, and 1040-EZ, but other tax forms and state tax forms are not included. These sites offer more complete tax prep for additional fees, but beware – many charge additional fees for e-filing.

Cost: $15-$80

IRS “Free File”

For taxpayers with an income of $54,000 or less (hello students), the IRS offers free, fast online filing. This service, launched in January, includes e-filing. To make sure you are eligible, check the IRS website.

Cost: Free

Pen & Paper

The traditional method of tax preparation. If you feel up to the task, feel free to tackle the paperwork yourself, but be careful. Missed deductions could cost you money on your refund, and incorrectly filled-out forms could lead to a “fraudulent return,” which can mean problems down the road.

Cost: Free