Ready, Set, File: It's Tax Time
By Michelle P. Sharrow, MBA

I know quite a bit of people who rejoice when they hear the words tax season. They anxiously await receipt of their supporting documentation so that they can file and receive their income tax refunds. And I know quite a few people who cringe in anticipation of yet another tax bill. Regardless of the group you fall in, there are a couple of things that you can do now to save time (time is money) when you are ready to file.

Electronic Filing

If you are a do it yourselfer and prefer to use an electronic filing software, consider your options even if you used a specific one last year. Among the top three are TaxAct, TaxCut and TurboTax. Of the three, TurboTax is the most popular and widely use. Several banking institutions offer it to their customers at a discounted rate. If you don't already know, check with your financial institution to make sure you are taking advantage of any deals they are offering. TaxAct, which I have successfully used for the past four or five years, is relatively simple to use and good for those who don't have complicated tax returns. Additionally, it is the cheapest of the three software programs. H&R Block offers TaxCut. It is free to file a simple federal tax return. For filers with more complicate returns, there are several versions of TaxCut available for a fee. Another advantage of TaxCut is that you can import your previous returns from the TaxAct or TurboTax software programs.

If your income is $57,000 or less, you can file your federal income tax return for free. Simply visit the Internal Revenue Service's website and follow the electronic filing links.

For those who like the thrill of completing their tax return by hand, you also have the option of completing a fillable form via the Internal Revenue Service's website.

Organize

If you want this task to go as smooth as possible, start organizing your supporting documentation as soon as they start trickling in. You'll also need your previous year's return. So retrieve that from your files. Use this time to tidy up your records from past years. According to the Internal Revenue Service, you should retain copies of filed income tax returns for three years following the tax filing season. The best method for discarding of older tax returns and supporting documents is to shred them.

After you've filed your return, you can improve your next year's situation by taking a few minutes to use the witholding calculator to determine how much money should be withheld from your check to avoid owing taxes or being charged a penalty for owing too much.

For those who are striving to stay on top of their finances, tax filing season is an excellent time of year. It gives you an opportunity to assess where you've been and allows you the opportunity to make modifications to get you where you want to be. While I can empathize with those who always owe each year, families can take delight in the amount of time and money they can save by organizing their documents and weighing all of their options when deciding which software to use. It is so worth it to go through this process every year.

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Michelle is a freelance writer based in Waldorf, Maryland. Her areas of expertise include finances and parenting. .

Personal Finance and Family Budget

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