Personal Tax Preparation for Individuals
There are many options to filing today. The mass-marketing of Turbo Tax, with the memorable and very comedic television commercials, makes filing by yourself sound like the best deal in town. Especially with the use of the word "free." If you are a single individual with a single W-2 and you do not own your own home, have no 1099-Miscellaneous income from a contracting job or business, no investments, and are not claimed by a parent... a professional tax preparer may not be needed. For everyone else, however, you risk losing money and gaining an unwanted audit. If you make an error and are later contacted by the IRS or state, claiming "I didn't know better" is not a reason that will create sympathy or a reversal of the interest and penalties that result. Is it worth trying to save money on a once per year expense (to have your taxes prepared professionally, by someone who is educated, experienced and must take continuing education every year in addition to passing a state approved exam every year to maintain their licensure)? You could be trading that "savings" of paying a tax preparation fee, for a high risk factor and a letter demanding 5-10 times that fee because you made an error due to lack of knowledge. In my experience, this risk just isn't rational, particularly when in most cases, you can write off this fee as a deduction. Additionally, if the only thing you are seeking is a cheap fee, likely you will get the equivalent in service and expertise.
Who must file a personal tax return?
Tax preparation for individuals includes all taxpayers who live and breathe! If you earned an income as an employee (even of your own corporation), collected interest, dividends, social security, had rental or other investment income, you will file a personal tax return, either a 1040 or 1040A.
Many small businesses file as LLC's or sole-proprietors and are surprised to find out that a tax return for the business is not separate from the owner's personal tax return. The businesses income and expenses are reported on a Schedule C along with a slew of other forms which are part of and included with the personal 1040.