I think there was a plan by the IRS a few years ago to roll out their own free filing software but tax software companies convinced the IRS to drop it in exchange for making simplified free versions available.
This is true.
nobthehobbit wrote:On the other hand, tax software can catch a lot of small things that paper filers might not that could increase your refund/decrease your amount owing (and possibly avoid an audit).
While I would believe this for large returns -- maybe for people with complex stock portfolios or who still itemize despite the massive increase in the standard deduction -- I don't think it's true for most filers. H&R Block wants you to
believe it's true, because that's how they sell it, but the filthy little secret of the American tax code is that it's
not that complicated for the average Joe.
1. Add up your income. (Are you employed? Great. Take the numbers on your W-2's and add them up. The IRS tells you which numbers matter. Schedule 1 tells you whether you have any special adjustments -- and you probably don't!)
2. Deduct the standard deduction. (It's a rare bird indeed who has any use for itemizing after the Trump tax cuts, which, for all their flaws, really did simplify the tax system for average people.)
3. Apply credits. (The IRS has a helpful document telling you about them.)
4. Compute tax. (This is literally just a big table where you look up your income and it tells you what you owe.)
5. Find out how much you've already paid in tax. (Refer to your W-2's for withholding information.)
6. Subtract 5 from 4 to compute your refund.
7. Print, sign, and mail.
Pretty much everything the average American will ever need to know about is here:
https://www.irs.gov/forms-pubs/about-form-1040
(And the great majority of Americans only need to know a tiny fraction of even
that!)
I actually much more often find that my tax software
misses important deductions, especially at the state level. The State of Minnesota offers a special annual refund called the Homestead Credit, where you get a substantial tax credit for living in a home you own while not being super rich. (There's a version for living in a home you rent as well, but it's far less generous and yes this is an example of middle-class tax subsidies at the expense of the poor but that's a Quark's Bar thread.) The size of the credit is based on property taxes paid.
And when I say substantial I mean
substantial. As a Firmly Middle-Class Household, my total federal income tax last year added up to just under $1000. My total state income tax was $1700. My Social Security and Medicare taxes added up to about $5500.
...and the Homestead Credit program sent me a check for $1,540, just for owning a house. This effectively cancelled my state income tax.
Neither H&R Block's software nor Credit Karma's have
ever found this credit for me. (Maybe a tax preparer would have; I've never tried using one.) I discovered it by filing my taxes on paper and reading the state's own documentation, which told me to go check out Form M1PR and see whether I was eligible. I file it every year, right after my filing software once again disappoints me by missing the program.
I've been doing my own personal and business taxes for years now. If you're not doing a bunch of complicated financial stuff in your life, it's really pretty simple just to fill out a few boxes and follow the "choose your own adventure" steps of the forms. And the forms themselves change very little from year to year, so if your circumstances don't change much, you can pretty much just use the previous year as the template of what all you need to fill in. Take your filing from whatever service you paid last year and use it this year to do it yourself for free.
This is exactly the way to do it. If you've ever had your taxes prepared before (by a preparer or by software), you should have a copy of the "prepared" tax filings around. Just grab them and use them as a template. They show you exactly how to file your specific personal taxes, in a way more individualized than any documentation ever could be. It changes very little year-to-year, so, unless your financial situation changes quite a bit, you'll mostly just be plugging slightly different numbers into the same fields.
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