If you do your taxes yourself, you're in the minority. The IRS estimates that more than 60 percent of taxpayers use a preparer.
But even if you use a tax pro, you can save money by doing some of the work yourself. One way is to complete the tax organizer many preparers give their clients at the beginning of the season. The more backup you have, the less time a preparer needs to spend on your return. Depending on where you live, a basic return for two wage-earners might cost a couple hundred dollars; more complexity could cost thousands.
The following online tools can help you perform the tasks outlined below. Some may require you to register, though there's no fee for use. And we've included time-saving tips.
The most popular tax software products all include features that use data from independent sources to value donated goods and let you tally contributions and charitable mileage.
A TurboTax feature, ItsDeductible, is free online whether you use TurboTax to prepare your taxes or not. It's available year-round. (Though the service is free, you'll need to register.)
CharityDeductions.com is offered through e-Smart Tax (formerly CompleteTax). It uses e-Bay transaction data to calculate the value of your donated goods. Its basic version also is available as a stand-alone program that you can access outside of e-Smart Tax. CharityDeductions.com in its stand-alone version is free until your estimated donation values using e-Bay total $500; then you're charged $24.95 per year to continue to use the e-Bay database.
Other popular tax software products offer similar features, but they're generally not stand-alone programs that you can access outside of the main tax-prep programs. TaxSlayer's Deduction Finder, for instance, is available with its free edition. H&R Block's DeductionPro is available with H&R Block Deluxe or Premium. TaxACT’s version, available with its Deluxe and Ultimate versions, is called Donation Assistant.
When we compared ItsDeductible to DeductionPro this year by searching for values for donated household goods and clothing, most valuations we saw were higher with ItsDeductible than with Deduction- Pro. ItsDeductible also took fewer clicks to arrive at item values. ItsDeductible also lets you value donated stock, a plus. (Tip: While you can't print out the estimated values of donated goods, you can highlight the pages with the estimates and use the "print screen" function to print the resulting image to use when you prepare your taxes.)
To ensure that your donation is deductible, check the charity's status on the IRS Exempt Organizations Select Check database. Note: Some small charities might not be listed, so ask the group for a letter that confirms its tax-exempt status. Churches, mosques, and synagogues can get tax-deductible donations even if they're not in the database.
For tax year 2013, you have the choice of deducting the larger of either your state and local sales or state income tax on your federal return. Deducting sales tax is a no-brainer in the seven states with no income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming) and the two states that tax only dividends and interest (New Hampshire and Tennessee). If you haven't kept all your receipts, you can estimate your annual state sales tax with the IRS Sales Tax Deduction Calculator.
The IRS AMT Assistant calculator is designed to help taxpayers see whether they'll be subject to the alternative minimum tax, a more onerous taxation system affecting some 4 million taxpayers, most with between $100,000 and $500,000 in adjusted gross income. Tip: The AMT Assistant is worthwhile if you're borderline and want reassurance that you won't fall under the AMT. But if you want an estimate of the damages, this tool won't help. When a grizzled AMT veteran used it, she got a message to fill out the convoluted IRS Form 6251, Alternative Minimum Tax, saving no time at all.
Other useful aids
Follow your money. Where's My Refund? on the IRS Web site will track your refund 72 hours after your filed return is accepted. The free IRS2Go smart phone app will give you the same info. Several of the tax-prep software companies offer the same free feature, and include tablet functionality.
Fill out the FAFSA. Completing the Free Application for Federal Student Aid can be difficult for many students and their families because the form requires income-tax information but must be submitted before many people have completed their returns. The IRS offers a streamlined way to fill out the FAFSA online using its Data Retrieval Tool. The tool automatically fills the online FAFSA form with parents’ and students’ federal income tax information. To use the tool, you must have e-filed your tax return at least three weeks before, or mailed it at least eight weeks prior. Other use restrictions apply. Go to the FAFSA site for more information.
This article appeared in Consumer Reports Money Adviser.
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