1An Overview of Filing Your Taxes Online

Taxes can be prepared electronically in one of two ways: using tax preparation software or by using an online service. There are a number of online tax filing services including H&R Block’s TaxCut and Turbo Tax, and the complexity of your returns is what will determine the service cost. For persons who satisfy certain income stipulations, free online filing is possible via the IRS Free File service.

2Advantages of Filing Your Taxes Online

Filing your taxes online can be just as effective as using an accountant’s services. Here are some of the advantages:

• The method is more accurate – Online filing websites can automatically detect most routine errors and simple mistakes that may end up delaying your refund. According to the IRS, the rate of error with online filing is below 1% while that for manual filing on paper is approximately 20%.

• Filing online is really fast and efficient –State and federal returns can be filed simultaneously which means filing will be instantaneous; it is possible to have your refund deposited into your account in as little as two weeks after filing.

• This method is easy – Filing your taxes on the web can be much easier than using tax software as one doesn’t need to install any software. Online filing is definitely much quicker than doing it the manual way.

• It is cheap to file taxes online – Considering the ease of automatic calculations and the possibility of securing benefits like free preparation of the 1040EZ, online filing is definitely cheaper.

3Who Is Best Suited To File Your Taxes Online?

The online preparation of tax returns is advisable for you if:

• You have a good idea about how the tax-filing process is done

• You can comfortably conduct research into any questions or issues that may arise during filing

• You are organized and have your financial records in good condition

• In the past year you haven’t moved and you have only had one employer

• You are computer literate and can follow the prompts issued by various online services

4Websites You Can Use For Online Tax Filing

Online filing of federal returns is freely offered at many places, but this isn’t the case for state filing. These websites will let you file your state returns at no charge:

• TurboTaxFreedom – This is the no-cost version of TurboTax and is accessible to filers whose adjusted gross incomes are $30,000 or less. The service is free in a number of states but in some states the charge was $9.95 as of February 2009.

• On-lineTaxes – Filing your federal and state returns can be done here for free if you are under 20 years of age, otherwise it will cost $7.95 (February 2009)

• Taxhawk – This website allows for preparation, printing, and online filing of federal taxes cost-free. State tax returns can be filed for free for persons whose AGI doesn’t exceed $20,000 (as of February 2009)

• Other websites are Beehive.org and TaxSlayer.com

5Tax Return Software

Before settling on any tax filing software program, you need to be sure that it is up to date with the most recent alternative minimum tax changes. Some of the top tax software include:

• TaxACT Deluxe – It is for people whose tax return preparations are straightforward. It has very competitive features and price, including help with the filing of FAFSA applications

• TaxCut Premium – This software from H&R Block is also best for basic tax returns. It features “Worry-Free Audit Support” where a tax expert will assist with your defence in the event of an IRS audit. The cost of this feature is included in the price of the software.

• TurboTax – This software is both fast and easy for uncomplicated tax returns. With the help of the live community, you can easily access the help and support you need.

• Others include CCH CompleteTax and the IRS Free File websites .

After you have chosen a website or software that you can use to file your tax returns online, there are various steps you can follow make the process both easy and successful.

6Organize Your Paperwork

The first thing to do is to gather every document that is needed for preparing your current return. The most common documents are:

• The 1099s

• W2s from each employer

• Social security numbers – for you, your spouse (in case of joint filing), and any dependents

• Purchase price records of all stock and mutual funds sold in the course of the year

• Receipts obtained from all charities

• Receipts of property tax

• Medical expenses receipts

• Bank account numbers

• Adjusted Gross Income from previous tax year

• K1s for persons who are partners in partnerships or LLC members

• Sole proprietors and LLC single members need detailed business books and income and expenses records

7Once Your Start Filing

The beauty of filing your taxes online is that you have plenty of resources at hand to help you along the way. With these resources and FAQ sections, it is easy to determine what each form and line is asking for. While these are freely offered, you can, pay a small amount to get real time professional tax support services via IM or phone.

These are help resources that are free for you to use:

• IRS – This is the best place to ask questions related to tax matters. You can use their website, recorded information service or live assistance line

• AARP Tax-Aide – This program is made available to senior citizens and other qualified persons and it provides no-cost tax counselling and simple income tax preparation

• VITA (Volunteer Income Tax Assistance) – This service pairs certified volunteers with persons of low to moderate incomes who need assistance with their tax return preparation

8E-filing Your Return