If I decided to do my own taxes, what are some key components I should keep in mind or look out for?

Hi!  For many people, doing your own taxes is a great idea, especially with the free and/or low cost software out there to guide you through the process. If you’ve never done your own taxes before, now is a great time to learn.  Even if you end up paying someone to do them this year or in the future, the exercise of learning how to do them will make you a better consumer in the future for negotiating costs in having them done by a professional. It will also help you understand what you pay in taxes and why. When I was a 21-year-old newlywed, I couldn’t bear the thought of paying someone to do our simple little taxes, so I went to the library, got the forms, and did them myself. That was back in the days when you did taxes by hand using an adding machine!  Over the years I continued to do our taxes and other family member’s taxes to help them.  Sometimes I made mistakes, but when I did, I would get a nice letter from the IRS gently pointing out my mistake and either asking me for more money or sending me more refund. It’s not the end of the world if you make a mistake when that mistake is made in good faith rather than in fraud. The IRS just lets you know what you did wrong and you pay them more or get more back – a small, honest mistake doesn’t generate an audit.

Here are the key components of doing your own taxes as I see them:

Tax Prep Software - if you fall into certain categories, you can access free tax software like FreeTaxUSA or other tax prep software like those listed in this article by the Simple Dollar - https://www.thesimpledollar.com/best-free-tax-software/. Note – depending on your age and income, you may be able to use VITA, TCE or AARP free tax preparation, which is usually offered at the library or community center in your town (see more here - https://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers).  Of course, that would defeat your goal of doing them yourself, but at least you’d not have to pay! If you need to buy software, check out this list of best tax software by PCMag - https://www.pcmag.com/article2/0,2817,1904319,00.asp.

Instructions – the tax prep software is full of great information and education that will guide you step by step through the tax prep process.  If you have additional questions or don’t understand something, the IRS website is great. Be sure to go to www.irs.gov, not www.irs.com.  The “.gov” site is our government site – “.com” site is a pay-for site. You can also call the IRS for help. You might have to be on hold for a little while, but the people who answer the phone are usually very helpful and friendly.

Saving on Taxes – it’s legal and acceptable to try and minimize how much you pay in taxes, so you want to educate yourself enough to be sure to get all the deductions, reductions, and credits you are eligible for.  The IRS Tax Code 25.1.1.2.4  (01-23-2014) discusses Avoidance vs. Evasion in taxes and states that “Avoidance of tax is not a criminal offense. Taxpayers have the right to reduce, avoid, or minimize their taxes by legitimate means. One who avoids tax does not conceal or misrepresent, but shapes and preplans events to reduce or eliminate tax liability within the parameters of the law. (1) Evasion involves some affirmative act to evade or defeat a tax, or payment of tax. Examples of affirmative acts are deceit, subterfuge, camouflage, concealment, attempts to color or obscure events, or make things seem other than they are.” In using the tax prep software, you’ll be asked questions as you go through that will help you pay the correct amount of tax but not too much tax. You can search the internet, too, for information about the kinds of deductions and benefits you are eligible for in your particular situation.

Keeping Records – be sure to keep all the documentation and forms you could possibly need from doing your own taxes. If you don’t have a printer at home, put the electronic PDFs of your tax forms and worksheet on a thumb drive and take it to a place and pay to print all the forms out. Keep the CD or link to the tax prep software you used (I have always bought my software on a CD I save rather than downloading it in case I have to look back at prior year taxes and need that year of the software application – if you got a new computer, the application will probably be gone). Keep all the records somewhere safe and accessible because you could need them when you do future year’s taxes, if you want to apply for a loan, or for other possible reasons.

I have so much more I could say, but I better stop now. I love learning new things, and I’m excited when others feel that way! I am so glad you wrote, and I hope that you are successful in learning how to do your own taxes. It will save you money in tax preparation fees and make you feel more in control of your money. Like me, you may get so interested in taxes that you become an IRS Enrolled Agent and start doing other people’s taxes too!  Best wishes and thanks for writing!