Few people would argue that taxes aren’t complicated. Even for the simplest of situations, taxes can be perplexing for no other reason than the rules keep changing. As your financial situation improves and your income increases, more rules apply and there are usually more steps that need to be taken to calculate taxes. When you buy houses, make babies, make investments, and start businesses, the web of tax rules and forms grows to hair-pulling proportions. At some point, the financial stakes become too high to risk errors in your tax returns that can result in costly audits or lost opportunities to reduce your tax burden.
Determining the Type of Tax Help You Need
The vast majority of people who file income tax returns use Form 1040EZ which requires little time and few entries. As people “graduate” to the more detailed Form 1040 questions arise over any number of issues, from the number of exemptions to take to figuring out if the Alternative Minimum Tax applies to their situation. On the other end of the spectrum, if you run a practice, the amount of time it takes to complete your taxes can grow ten-fold. Depending on where you are on this spectrum, you can access tax help from a number of sources, some for free, others for a fee.
If you expect your adjusted gross income to less than $58,000, you can go on line to the IRS and use its free FreeFile service (http://www.freefile.irs.gov/) which hooks you up with a real tax preparation and filing site such as FreeTaxAct. It’s all electronic and it’s quick. You can expect your refund within a week.
If you don’t qualify for FreeFile, you can still use the FreeFile forms for free. These are electronic forms that enable you to complete them online and then e-file them for free directly to the IRS. The advantage of using this source is that you are working within the IRS website which has all of the tax information you can ever want. The downside is that it doesn’t provide online guidance as you go through your tax forms.
For the cost of a dinner out, you can use any number of tax preparation sites such as TurboTax, or TaxCut. These are great values because they can save you a tremendous amount of time while ensuring that you submit an error-free return. The tax savings tips they provide can usually help you cover the cost of the program
If you have a practice, you can upgrade to their business versions for a few extra dollars. The guidance they provide in completing Schedule C, Schedule E and other business tax forms is invaluable. All of these programs include online support in which you can chat with tax experts on any specific question you might have.
Most newer physicians can get by using one of the online resources mentioned here. If you have multiple streams of income from various sources such as real estate and other investments or a business, your situation may be too complex for tax preparation software, requiring the services of a CPA or certified tax professional. Most physicians know when they need that kind of help and are willing to pay the fees if it will help them avoid an audit and also to ensure they maximize their tax benefits.
It is highly recommended that, even if you prepare your taxes using on online tax preparation program, you have your returns reviewed by a tax professional. This is for the extra measure of protection in case you are called for an audit. While you will have to pay a fee for professional services, it will be relatively low because you have already done most of the work. Think of your fee as small premium for audit-insurance.