Don't overpay for help with your taxes

Scrooge McDuck does his taxes / DALL-E 2

[Note: This article was originally published in January 2023. I republished it in April for the benefit of U.S. tax procrastinators.]

It’s January, which means, if you’re an American working adult, that you are probably watching your mailbox (or your inbox) for the W-2s and 1099s and other official forms you’ll need to file your Federal income tax return.

Your inbox is probably also filling up with offers from companies like H&R Block and Intuit, offering discounts on tax software like H&R Block Tax Software and TurboTax.

But wouldn’t it be better if you didn’t have to pay to file a simple tax return?

If your return is uncomplicated (simple wages, no business, no rental property) and your adjusted gross income (AGI) is under $73,000, you can get help filling out your Federal return online and filing it for free, and you might even qualify for a free state return. The Internal Revenue Service has a well-organized Free File Online Options page where you can track down all your options.

The big tax software companies really don’t want you to find this page, by the way,

And remember, your Adjusted Gross Income is not the same as your take home pay or your salary. There are lots of adjustments, big and small, that will decrease (or, in some cases, increase) your AGI. Use this tool to help get a reliable estimate of that number:

IRS Free File Online Lookup Tool

That form is remarkably detailed and incorporates most of the information you’ll need to do your taxes, so get your paperwork in order before you start..

If your AGI is over the limit or your return is complex (if you’re self-employed, if you have income from rental property, or if you have capital gains from the sale of stock), you’ll need to pay for software or pay someone for professional help. I do not recommend trying to fill out a complex tax return manually. (Even tax pros don’t do that.)

Before you buy, check with your bank or credit union to see if they offer any discounts. (Many credit unions offer substantial discounts on TurboTax software and in-person H&R Block services.) Also check your credit card company’s website to see if they have any available rebates or offers.

But before you do that, look at FreeTaxUSA, which is on the approved IRS list of free options. Even with a moderately complex return you can do your Federal taxes for free and pay $15 for each state tax return you have to file. They include the option to import your W-2s, which can save a lot of time.

This year’s Federal filing deadline is three days later than normal, on Tuesday, April 18, 2023. (The normal April 15 date falls on a weekend, and Monday is Emancipation day in Washington, DC, which the IRS treats as a Federal holiday for tax purposes.)

If you live in California, you might qualify for an automatic filing extension to May 15, 2023, as a result of the extraordinary storms this month.. To see if you live in an affected area, check this IRS release:

California storm victims qualify for tax relief

And if you’re the procrastinating type, you can get an automatic six-month extension, no questions asked, by filing for an extension between now and the filing deadline. That extension changes the filing deadline to October (or November, for Californians). You can even do it online, using one of the providers listed on the IRS Free File page.

Note that this extension gives you extra time to prepare your return, but you still have to pay whatever taxes are due by the April 18 (or May 15) deadline. If you underpay, you’ll owe interest and, possibly, penalties on the shortfall. And don’t wait until October 1 to start working on this, because there’s no option for another extension.

If you miss the filing deadline and haven’t requested an extension, you’ll be OK as long as you don’t owe any taxes. If you do owe money to Uncle Sam, you’ll owe a late-filing penalty for each month you’re late, in addition to the interest and underpayment penalties. If you’re more than 60 days late, your minimum penalty could be $210 or 100% the amount of tax due, whichever is less. It adds up, so don’t put things off too long.

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