Tax Advice
The following is some general advice, which you can take or leave. However, we recommend you take it.On doing taxes online
We have pages on the dos and don'ts of tax preparation and our before you file page. We also strongly recommend that you file your taxes online. Even the IRS recommends e-filing because there is:
- No mail loss
- Less processing time
- Less waste of paper
- Better accuracy due to computer calculation and easy access to checking through databases, etc.
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- Get their refunds faster (usually, much faster)
- May find their forms easier to fill out with certain programs
- Find the entire process more convenient, less time consuming and cheaper.
Many people have concerns about safety and security, of course. Many sites use secure connections, licensed by Thawte and other security watchdog sites (VeriSign and TrustE are two more names, but there are others). There certainly are occasional stories of hackers breaking into government records. However, there have always been news stories about mail theft too. Crime can be found everywhere and criminals get caught.
On technology
You also need to be conscious of your own technical abilities. E-file sites, including the ones profiled on this website, are becoming easier to use every year, but you need to be sure that you understand everything you are doing.
Technology novices might find it hampering to keep their mind on the accuracy of their tax returns, while they deal with technology they don't understand exactly. Use the e-file company's Help menu or get help from someone you know. Give yourself time to learn. If you don't have the patience, or just don't get it, then you can go back to your old ways.
On price
You need to find your own comfort zone here. There are three basic possibilities:
- Freefile is available for those who qualify (usually under $30,000 in income).
- E-file services guide you through the tax filing process for fees and these do vary quite broadly.
- Professional tax preparation help, for complex tax returns.
Taxes and Your 401(k)
One of the biggest advantages to joining your company's 401(k) plan is income tax deferral. All the money that you choose to contribute to your 401(k) account is deducted from your pay before you calculate your income taxes. This is important because it means that your taxable income is lower and also that you don't have to pay income tax on your pre-tax contributions until you withdraw them from the plan (at which point you might be in a lower tax bracket).
