Which Tax Filing Method is Right for You?

Which Tax Filing Method is Right for You?

The year is almost over, and you know what that means… tax time is coming. People can start filing their 2013 income taxes on January 31st, so it is time to get your tax forms in order and decide how you will file in 2014.

Hire an Accountant

Many people like using software to do their own taxes, but I want to start with the option to hire a professional accountant to do your taxes.

If your taxes are simple and you only had one job as a single income source in 2013, you are certainly going to save money by using software. However, if your taxes are complicated, it is smart to hire a professional.

My 2013 taxes will include income from one employer, income from 3 LLCs, income from investments, forms from three retirement accounts including a rollover, donations, work related move expenses, interest income from multiple accounts, a mortgage refinance, and a stack of 1099 forms.

A couple of years back, I did my taxes using TurboTax myself (just for comparison, I didn’t file with TurboTax) and hired my regular accountant to do my taxes as well. The accountant saved a little more than his cost plus he would support me if I were ever audited.

Online Tax Programs

Popular tax software like H&R Block, TurboTax, and TaxACT are great options for millions of people each year. If you have taxes on the simpler side of things, these programs can do absolutely everything you need.

In my experience, tax programs can handle any of these situations easily:

  • Standard W2 forms from your employer
  • 1099-INT for bank interest
  • Mortgage interest deduction
  • Student loan interest deduction

If you have a load of complicated 1099s from freelance work, contracting, or an active investment account, you have to pay for the higher versions of the programs. At that point, you might as well have hired an accountant for the same price.

Keep Organized All Year

Nothing makes taxes tougher than scrambling to get all of your paperwork together last minute. Keep your expenses and forms organized to make the process as simple and smooth as possible.

I use Manilla to keep all of my bank, credit card, and investment statements in one place for free. If you have never tried it, what do you have to lose? It’s free.

I also use Personal Capital to track my investments and other spending. If you don’t like the online only options, you can also use a program like Quicken to keep your financial info in one place on your home computer. Those are particularly helpful if you plan to itemize your tax deductions.

Make sure to keep your bank statements and tax records every year for your reference.

If you do any freelance or contracting work, I suggest a program like Quickbooks or Quickbooks Online to track your income and expenses. I use Quickbooks Pro desktop version myself. You can also check out other business accounting software available online.

Make It Easy on Yourself

At the end of the day, we all have to file our taxes. The goal is to save as much money as possible while making things easy on yourself. No need to spend a fortune or make things too complicated. Just try to keep it simple.

How do you do your taxes? Share in the comments.