When it comes to filing your taxes, the number of options out there can get a little overwhelming. Should you file online? Go to a professional? Do it yourself with the help of the latest software? Ray Hennessey, Editor of SmartMoney.com, has some tips on picking the best method for you.
For most people, using tax preparation software is the way to go. The programs are much easier than they used to be and they can keep you from making simple mistakes. "The forms are there, and in a lot of cases, it's automated," say Hennessey. "You can download all your financial information right there."
Using a software program to file your taxes will also give you access to the most up-to-date changes in tax laws. "The government has a way of changing around the tax law at the last minute," says Hennessey. "The downloads for these [programs] are great because it gives you the most up to the minute [changes]."
Another benefit? No appointment needed. By filing your taxes yourself, you can do it on your own time. "You don't have to worry about when your accountant can fit you and and when he's going to file," says Hennessey. You can do your taxes when it fits best into your schedule.
There are some drawbacks to using tax preparation software, however. The costs vary, depending on what program you use. The software itself may not cost much, but there are often add-ons that you'll need to purchase as well. "If you want deduction finders, or things like that," says Hennessey, "they add on to it."
Another drawback is that the software may not be the best choice to file your state taxes on. SmartMoney.com evaluated several filing methods and found that the state tax results were inconsistent. "The federal [filing] was fine," says Hennessey, "but the state programs were very poor." Depending on how many variables you have that may affect your taxes, it may be best to consult a professional.
Also, if you're looking for great audit protection, filing software may not be for you. While many programs offer extra audit protection for a fee, it's not quite the same as going to an accountant.
The deciding factor, according to Hennessey, should be how many variables may affect your taxes. In SmartMoney's evaluation, Hennessey says, "We took a woman who got married, moved, had a lot of different changes in her life and got vastly different [results]. I think in those cases, you should go to a CPA." But if you're like most people and haven't had many changes in the past year, tax preparation software may be the best choice for you.
For more information on preparing your taxes and other financial advice, click here.
By Erin Petrun
Copyright 2007 CBS. All rights reserved.