My parents did my taxes until I graduated college. As I result I missed out on a lot of important tax-related financial lessons until well into my young adulthood. Every year I got an income tax refund check or two, and failed to grasp that this was an adjustment made to the amount that was already being withheld from each of my paychecks. The first time I owed more than I had paid throughout the year, I felt betrayed! With a full-time job and few deductibles, I could no longer rely on what I had come to think of as my annual tax bonus.
When I first started doing my own taxes an online product called TurboTax was recommended to me. By asking you a series of questions, the program fills out your tax forms (the scary, dense, official tax forms) automatically, and even submits them for you. When you have figured out your adjustment there is even an online payment/direct deposit option that is extremely convenient.
One of the best things about this product is that you can use it to do your federal income tax adjustment for free! Many alternatives (like H&R Block which my girlfriend used this year for her federal taxes) are also usually free for filing your federal returns. They are a great way to help you learn more about how taxes work at no cost to you!
To do your state taxes for free, you will need to do a little more legwork. The appropriate forms for your state are usually available online or in your local public library (another great resource) and can often be submitted electronically also. Although filling out these forms yourself can seem intimidating, I am about to share with you my method for making it much more manageable.
TurboTax only charges you for filing your state returns at the moment of filing. You can go through the question/answer process for practice, for free. This is almost like having an application wizard (remember the Microsoft Office paperclip?) guiding you through the entire process. By doing this and filling out the official state form yourself at the same time, you can save yourself the $30 TurboTax fee without sacrificing the ease of use that the flowsheet-style approach offers. Another advantage is that you can answer the questions differently if you’re not sure about something and get your estimated refund updated in real-time.
That is the approach that I used this year, and I’m done with taxes before February is halfway over! Combining both my federal and state tax adjustment I just barely made money back, and I am not ready to give it away so casually for somebody else to do what I can do for free. Don’t be like Homer Simpson. Do your taxes early, be informed, and you’ll learn not to dread this time of year but instead to treat it as an opportunity to learn more about your finances and steer yourself into early retirement.