By now, most of you should have received your 1099s or W2s from your employer to start your taxes. According to a recent study, 49% said they would pay someone to do their taxes, 38% would do it themselves with tax preparation software, 10% would do it themselves by hand, and 3% will have a friend or family member do it for free.
How do you know the best way to prepare your taxes? The choice could either save or cost a large sum of money. Taxes are likely to continue to rise and become more complicated. Tax preparation fees can cost several hundred dollars, paying unnecessary taxes can run into the thousands, and the cost can be greater if you file a false return. This is why the choice you make can be one of the most important financial decisions you make!
There are three basic options when filing taxes:
- Preparing it yourself using tax software. Prices range from $9.99 to $49.99 for online programs such as TurboTax, TaxAct, etc. Some offer free versions if you have simple tax needs. You can also go to the IRS site to file for free.
- Hiring a Tax Professional. Those that are qualified to help are Certified Public Accountants (CPAs), tax lawyers, and enrolled IRS agents. They charge either a fixed rate or hourly service. According to the National Society of Accountants, federal and state tax preparation with itemized deductions costs an average of $261.
- Using a Tax Storefront Service. By now you have probably seen commercials from H&R Block or the person dressed as the Statue of Liberty waving a sign for Liberty Tax. These companies help you fill out tax forms but are not CPAs or accountants. The average cost is $147 for H&R and $191 for Liberty.
Which one should you do? There is no one-size-fits-all answer but here are some rules of thumb that can help. Below you will see a comparison chart and breakdown of costs for online tax options.
- Prepare Your Own Taxes if:
- You have a simple tax return with few or no deductions, investments, dependents, and don’t own a business.
- You have patience and time to do it. According to the IRS, the estimated time to complete a return is 16 hours.
- You are comfortable doing your own research. You will have to navigate the tax software or forms, and fix errors as they pop-up.
- Hire a Tax Professional if:
- You have a complicated tax return with many and large deductions, investments, dependents, and own a business. If you plan on itemizing your deductions, it may be best to get professional advice to maximize them.
- You make more than $200,000 a year. Studies show that when you hit this income limit, the chances of being audited are much higher.
- You had a major life change. If you got married, had kids, bought a house, or started a business, then you want to document it the right way to avoid getting audited.
- You don’t have the time, patience, or knowledge to do it!
- Hire a Tax Storefront Service if:
- You have a simple tax return but want to outsource filling out the tax forms and filing.
- You want the convenience of dropping by to see a tax preparer without an appointment.
- You want it done as quickly as possible without going online
* the price listed is subject to change without notice from the Company and is updated as of February 2014. Please visit the tax sites for more information. The cost will be based upon your tax needs.
| Online Tax Preparation | ||||
| Product (Company Name) | Version | Federal 1040 Simple Price |
State Price |
State e-File |
| 1040.com (Drake Enterprises) | Simple | $0.00 | $29.95 | $0.00 |
| 1040Now | 1040EZ | $14.95 | $17.95 | $0.00 |
| H&R Block Software |
Free | $0.00 | $27.95 | $0.00 |
| CitizenTax | – | $19.99 | $29.99 | $0.00 |
| CompleteTax (CCH) | Basic | $0.00 | $29.95 | $0.00 |
| efile.com | Free Federal | $0.00 | $19.95 | $0.00 |
| EfileTaxReturns.com | Free | $0.00 | $22.95 | $0.00 |
| eSmart Tax (Liberty Tax) | Basic | $0.00 | $19.95 | $0.00 |
| eTax.com | Free | $0.00 | $29.95 | n/a |
| ExpressTaxRefund.com (RT Software Inc.) |
Basic Return Package | $29.95 | $20.00 | $20.00 |
| ezTaxReturn.com | Free Federal + State Return |
$39.95 | $0.00 | $0.00 |
| FileYourTaxes.com (Taluy California Corp.) |
Free | $0.00 | $23.50 | $0.00 |
| Free1040TaxReturn.com | Standard Return | $9.95 | $19.95 | $0.00 |
| FreeTaxUSA (TaxHawk, Inc) | Free Edition | $0.00 | $9.95 | $0.00 |
| IRS | Free File | $0.00 | n/a | n/a |
| Jackson Hewitt | Basic | $0.00 | $29.95 | $0.00 |
| KeyTaxx.com | Standard Return | $9.95 | $19.95 | $0.00 |
| OLT OnLine Taxes | 1040EZ Simple | $0.00 | $7.95 | $0.00 |
| OnePriceTaxes (AFJC Corp) | Federal and State Taxes | $14.95 | $0.00 | $0.00 |
| OnlineTaxPros | Deluxe | $19.95 | $14.95 | $0.00 |
| RapidTax (Rapid Filing Services LLC) | Basic | $9.99 | $19.99 | $0.00 |
| TaxACT (2nd Story Software) | Free Edition | $0.00 | $14.95 | $0.00 |
| Taxbrain (Petz Enterprises, Inc) | 1040EZ Tax Package | $14.95 | $29.95 | $0.00 |
| TaxSlayer | Free Edition | $0.00 | $17.90 | $0.00 |
| TaxHawk | Federal Tax Return | $0.00 | $0.00 | $0.00 |
| TaxSimple (Thompson Reuters) | Basic | $0.00 | $24.95 | $0.00 |
| TurboTax (Intuit) | Free Edition | $0.00 | $27.95 | $0.00 |
| Tax Software | ||||
| Product (Company Name) | Version | Federal 1040 Simple Price |
State Price |
State e-File |
| H&R Block Software |
Basic | $19.95 | $36.95 | $19.95 |
| Tax Act (2nd Story Software) | Free | $0.00 | $14.95 | $7.95 |
| TurboTax (Intuit) | Basic | $29.95 | $36.95 | $0.00 |
Paid tax preparer. A paid tax preparer can give you advice specific to your situation and may be the best approach for complicated tax returns and maximizing legal tax deductions. However, the personal service will cost you more: a federal return will typically cost between $112 and $191, with another $15 or so for a state return.
| Professional Tax Preparer | ||||
| Company | Type | New York City | Kansas City | Los Angeles |
| H&R Block | Federal State |
$40 $39 |
$119 $39 |
$99 $39 |
| Jackson Hewitt | Federal State |
$75 $40 |
$150 $40 |
$80 Free |
| Liberty Tax | Federal State |
$200 Free |
$250 Free |
$150 Free |
| Individual tax preparer | Federal State |
$165 Free |
$40 $40 |
$50 Free |
Videoconferencing. A hybrid of online preparation and the personal approach is a tax preparation video conference. H&R Block offers a variety of these programs, with total costs for a federal and state return ranging from $39 to $408.
| Live Video Conference, Lowest Advertised Cost | ||||
| Product (Company Name) | Version | Federal 1040 Simple Price |
State Price |
State e-File |
| Block Live (H&R Block ) | Basic | $0.00 | $39.00 | $0.00 |