As tax season nears, millions of Americans are gathering their documents as they prepare to file their returns. When it comes time for you to file your returns, you will only have two choices. You can either choose to file them on paper and mail them to the Internal Revenue Service, or you can submit them digitally online. Preparing your taxes using computer software or through one of the available online programs offers the advantages of better safety, fewer errors and faster refunds.
Some people can file their taxes from their phones using mobile apps, and small businesses have many forms available that can be filed digitally. There are a variety of programs that are available for you to use to prepare and to submit your taxes. Finally, if you owe money and are unable to pay some or all of it, there are tax debt relief options that might help you.
How Do Digital Tax Services Work?
In 2003, the IRS introduced its Free File system. The agency partnered with a number of different tax software companies so that people who met certain income guidelines could prepare and file their taxes online. People who do not meet the income guidelines may still file their taxes online using a digital tax service, but they will have to pay a fee.
In order to use these services, you simply go to the IRS website. If your income was $66,000 or less during 2017, you are eligible to use the Free File system. If your income was greater than $66,000, the IRS offers free fillable forms but gives only very basic advice. If you are eligible for the Free File services, you click on the link on the IRS website. You will then be given a list of free software offers from one of the partner companies. You can choose one and then get started. You will need to have all your documents ready so that you can enter the information when you are prompted.
If you use a digital tax service that is not free, you will also need to have all your documents gathered together. The documents that you will need include the following:
- Identification proof
- Social security numbers for you, your dependents, and your spouse
- Dates of birth for you, your dependents, and your spouse
- Filing and residency status
- Last year’s tax return
- W-2s, 1099s, etc.
- Statements of interest or dividends
- Proof of tax credits and deductions
- Bank account and routing numbers
When you begin, the digital tax software service will give you prompts to guide you through the process. It also will give you advice and answer the questions that you might have. These programs also give you warnings and alerts to help you to avoid making mistakes.
When you have completed your return, you will be given the option of printing it out and mailing it or submitting it online. If you choose to file it digitally, you will sign it electronically. When you click submit, your return will be sent securely online to the IRS. Within 48 hours, the IRS will let you know that it has received your return and will give you an estimated processing time. You will have the option of requesting that your refund is deposited by direct deposit into your bank account. If you prefer, you can also request a paper check. Refunds that are sent by paper check will take much longer than will refunds that are paid by direct deposit, however.
Should I File Online?
Filing your taxes online offers multiple benefits as compared to preparing them on paper and mailing them. When you prepare and file your taxes by hand, you are much likelier to make mistakes that can lead to an audit. You are also likely to miss deductions and credits for which you might be eligible when you try to do your taxes on paper.
Filing your taxes online can help you to avoid making mistakes. Online tax preparation is also much easier, and much of the process is automated. Using the software online can help you to save time because of its ease of use. You will be prompted to enter your information, and the programs offer you advice and give you alerts. When you are finished, you can provide your bank account and routing numbers to receive your refund by direct deposit within a few weeks. You are also able to sign your return electronically and submit it directly to the IRS.
According to the IRS, filing your taxes online is much safer and faster, and you are much less likely to make mistakes on your return. You will also save money on postage, paper, and envelopes when you choose to file your tax return online.
Do You Run a Business?
If you own a business, there are some differences in the tax filing process. Your requirements will depend on the legal entity structure of your business and if you have employees. Sole proprietorships are the simplest form of business. If you are a sole proprietor, you will complete Schedule C and report your net income or loss on Line 12 of your federal form 1040. You will also be required to pay self-employment taxes, which are calculated on Schedule SE and entered on Line 57.
Partnerships file a Form 1065 with the IRS, which is an information return. They then distribute K-1s to each partner, which list each partner’s individual K-1 income or loss from the partnership. Each partner is then responsible for including his or her K-1 income or loss on his or her individual return. Partnership income tax returns are due by March 15 along with the Schedule K-1s.
How LLCs pay taxes depend on how many members they have. Single-member LLCs pay taxes as sole proprietors do because the IRS does not recognize LLCs as tax entities. When they have multiple members, they are treated as partnerships as described previously.
If your business is organized as an S-corporation, it is a pass-through entity. The corporation will file a corporate return using Form 1120S. Each shareholder’s net income or loss will be documented on K-1 forms, which will then need to be reported on their individual income returns. S-corporation owners are each taxed on their distributive share of the company’s profits. S-corporation shareholders do not have to pay self-employment taxes because they are not considered to be self-employed. Owners who are also employees receive regular paychecks from which FICA and Medicare taxes are withheld.
C-corporations are considered separate entities and are taxed at the corporate rate. They must file Form 1120 with the IRS. The Form 1120 must be filed by the end of the third month following the corporation’s end of its tax year.
Many small business owners must also pay quarterly tax payments. If you expect to owe more than $1,000 on your taxes, you will need to make estimated quarterly tax payments. Estimated quarterly taxes are filed each quarter using Form 1040-ES. Businesses can file and pay their taxes online, which helps to make the process less complicated.
Can I File from My Phone?
With the advancement of mobile phone technology, it is now possible for you to file your taxes online from your smartphone. Some banks offer mobile apps that can be used to file taxes. According to the IRS, filing taxes using mobile apps is the fastest-growing method of filing. H&R Block and TurboTax both offer apps that you can use to prepare your returns and file them online from your mobile phone. With the app from H&R Block, you can take a photograph of your W-2 and the app will input the information for you. Using the mobile apps to file returns is great for people who have simple returns.
What Program Should I Choose?
Choosing the right tax software program to file your taxes online can be confusing. Here are some reviews of the leading programs so that you can choose what will work the best for you.
H&R Block Premium 2017
H&R Block Premium 2017 is a good choice for people who are self-employed, run small businesses or own rental properties. The interface is straightforward, and you can use its photo feature to import the information directly from your W-2 so that you don’t have to spend time trying to type in information that is printed in small boxes. The program contains hyperlinked terms that you can click on for more information or for definitions. There is a banner that runs across the top to let you know how far along you are on your return. Support is available via free online chat with tax preparation professionals. The cost for filing your federal return with this program is $79.99, and the state return costs $39.99. H&R Block also offers a free software program and a deluxe version that are less robust.
Intuit TurboTax 2017
Intuit TurboTax 2017 offers several versions ranging from its free federal version to its self-employed version. The self-employed software costs $114.99 to file your federal return and $39.99 to file your state return. The federal free version allows people who have simple returns file 1040EZ or 1040A returns, but there is a $29.99 fee for state returns. Intuit also offers a deluxe version, which allows you to itemize your deductions and to access support features. There is also a premier level which allows you to report income from investments and your rental income. TurboTax is known for its user-friendliness. It uses cloud software so that you can work on your return across your devices. The software interviews you throughout your return to guide you through the preparation process.
TaxAct Online Premium 2017
TaxAct Online has a no-frills design, which turns off some people. However, it is more affordable than some of the offerings from other companies. Its premium version costs $54.99 for your federal return and $35 for your state return. It is the most robust software offered by the company and can handle returns for self-employed people, freelancers and others who have complicated returns. While the software is not fancy, it does include all the basics.
Credit Karma Tax 2017
Credit Karma Tax 2017 is completely free, but it does have some issues. It supports all the major IRS forms and has an interface that is easy to use. However, you are not able to use it to import your information from its competitors. The support system is insufficient, and it does not include state returns for each state.
TaxSlayer Premium 2017
The main draw of TaxSlayer Premium 2017 is that it is cheaper than most of its competitors. The premium version allows you to file your federal return for $40 and your state return for $27. The premium version allows you to itemize, imports W-2s, and your prior-year tax returns and gives you access to tax professionals if you need help. It has a good interface and an online knowledge base. If you have questions, you can submit them and receive answers from an enrolled agent within 24 to 48 hours.
Jackson Hewitt Online Premium 2017
Jackson Hewitt Online Premium 2017 is user-friendly and walks you through the tax preparation process by asking you interview-style questions. The premium version is robust and is a good choice for self-employed people, freelancers and independent contractors. It costs $79.95 to file your federal return and $39.95 to file your state return. You can receive unlimited support by phone or chat. It allows you to import returns from its competitors and to import W-2 information, but it does not have the donation assistant or allow you to import 1099s.
What Is Tax Debt Relief?
If you are unable to pay your taxes, you should still file your return on time. There are several debt relief options available to you from the IRS. If you owe $50,000 or less, you can file an online payment agreement request on the IRS website. If you owe more than $50,000, you can file an installment agreement request together with a collection information form.
You are also able to submit an offer in compromise, which is an offer to settle your tax debt for less than the total amount that you owe. There are strict eligibility guidelines for an OIC, and you must also pay a nonrefundable $186 fee when you file your request. If your OIC is approved, you will pay a portion of your tax debt immediately, and the IRS will drop the remainder of your balance.
You can also request an extension of time to pay based on an undue hardship. If this is approved, you will be given more time to pay, and the IRS will waive your fees and penalties. Finally, in some circumstances in which you are unable to pay any of your tax debt, the IRS may grant you a temporary halt in the collection process and determine that your tax debt is currently uncollectible.
The ability to file your taxes online has greatly simplified the tax filing process. As technology has advanced, you are able to file your taxes from your laptop, tablet or phone using digital tax services. You are much less likely to make mistakes, and the process is straightforward. Both individual taxpayers and businesses may take advantage of digital tax services to make tax season much smoother.