How to Decide Which Tax-Filing Method Is Best for You

which tax-filing method is best

As tax season approaches, it’s safe to say that few people are looking forward to the annual headache of filling out mounds of paperwork. Even after filing, many Americans wonder if they’ve made mistakes on their tax returns.

For the average person, the tax-preparation process begins with the important step of deciding how to file. There are many different methods of filing taxes, and each option has its own benefits and drawbacks. GOBankingRates conducted a survey to see which tax-filing methods are preferred. The results reflect the overall societal trend of switching from paper to digital but also reveal differences among men and women as well as among age groups.

Related: 3 Tips for Filing Taxes at the Last Minute

6 of the Most Popular Tax-Filing Options

GOBankingRates’ tax-filing survey asked Americans which of six basic methods they prefer for handling their their tax returns. Results varied across filing methods that offer different user experiences, from easy-to-use digital services that allow filers to do their own taxes to relying on the help of other people.

1. Tax Preparation Software

A common method of filing taxes is to use a digital tax tool like TurboTax or H&R Block’s tax preparation software. About 34 percent of the surveyed group chose to go this route.

While using a tax tool does put more responsibility on the filer, most of today’s popular programs are inexpensive or even free. Furthermore, tax preparation software is typically easy to use, once you’ve gathered the necessary documents. Additionally, you can fill out the forms over a period of weeks or even months leading up to tax time; as a result, filers are less likely to wait until the last minute to get started.

Once you have finished using the software, you can either submit your return online or print out paper forms to send by mail.

2. Accountant

If you don’t want to be responsible for filing your own taxes, you might consider hiring an accountant to do the job. About 29 percent of the population uses this approach, which is widely regarded as a more traditional method of filing. Although hiring an accountant tends to be more expensive than purchasing a tax preparation software package, relying on a professional does have its advantages.

“With an accountant, you do not have to worry about filling out any forms or making a mistake in reading any of your tax documents,” said Bill Rivero, an accountant in Danbury, Conn. “Also, in many cases, accountants are much better equipped to handle complex situations like small business tax filing than software is, and accountants can offer advice on tax minimization strategies for use in the future,” he added.

In the event of an audit, an accountant can also act as a buffer between a client and the IRS. Along with offering protection, accountants provide valuable advice during this highly stressful time.

3. Friend or Family Assistance

Some filers are reluctant to prepare their own tax returns but are unable — or unwilling — to pay for an accountant. If you fall into this category, you might want to consider having a trusted friend or skilled family member file taxes on your behalf. According to the GOBankingRates survey, 11 percent of respondents opted to seek a friend or relative’s assistance when filing their taxes. Not only does this method minimize the work burden on the taxpayer, but it also has the advantage of costing little to no money.

Still, having someone else file your taxes can have serious consequences, especially if that person is doing it as a favor or has little experience. Taxes are complicated, and the willingness of people to do favors for others only extends so far. A friend or family member might not put the level of care into filing your taxes that you or an accountant would.

4. IRS Documents

Many people are tempted to avoid the stress of tax season by having someone else file on their behalf. However, people who use the services of an accountant or family friend might miss out on the opportunity to take advantage of certain perks — or neglect to consider potential problems. It’s easy to forget the cost of an early 401k withdrawal or miss out on a deduction opportunity if the paperwork is done by someone else and you just sign at the end. If you opt to file on your own using the documents provided by the IRS, you can gain a much more comprehensive appreciation for the Internal Revenue Code and its nuances.

Currently, only about 9 percent of the population chooses to file taxes using IRS documents alone, according to the survey. Although dense, these documents are available free of charge and are worth reviewing if you want to learn more about your tax options.

Related: 10 Most Common IRS Tax Forms Explained

5. Brick-and-Mortar Company

Not everyone winds up writing a sizable check to the IRS at the close of tax season. In fact, many people find themselves cashing refund checks in the wake of filing. The earned income tax credit is a federal income credit designed to aid families with small to moderate incomes. If you fall into this group of people expecting a refund, you might want to consider getting your taxes done early and perhaps even through a particular source.

Brick-and-mortar businesses like H&R Block, Liberty Tax, and Jackson Hewitt can get your taxes filed early and inexpensively at a minimal cost, but they also offer refunds on the spot. Some taxpayers can even receive their refunds in advance through a refund anticipation loan that is paid back once the government check arrives. If you are expecting a sizable refund but need cash now — such as to pay down holiday debt — filing with a brick-and-mortar company can be a big advantage. About 8 percent of the survey group opted to visit a brick-and-mortar tax preparation company.

6. Opting Not to File

A small segment of the population opts for a completely different approach to filing their taxes — not filing at all. About 9 percent of the population chooses this path, according to the GOBankingRates survey. If you make no significant income for any reason, you are typically not required to file taxes. Generally, the threshold for filing is around $10,000 per person. Individuals who earn less than this amount in a calendar year don’t typically owe money to the IRS.

Additionally, some people don’t file because they are married and have spouses who file on their behalf under the “married filing jointly” status. Others who are claimed as dependents by taxpayers might not have any obligation to file.

Of course, some people who are supposed to pay their taxes opt to flout the law by not filing. Taking this course is generally regarded as a bad idea and can affect your legal and financial standing moving forward.

Men and Women File Differently

When choosing among the six basic methods of filing taxes, men and women tend to select different options. While both sexes rely on tax software over other choices, men and women differ markedly in their other filing selections, according to the survey.

In general, men are more likely than women to have an accountant file their taxes or to take on the responsibility themselves using the IRS-supplied forms. In contrast, women seem to prefer having a family member or friend help out or rely on a tax preparation service such as H&R Block.

Why Your Age Might Determine Your Tax-Filing Preference

Just as the sexes choose to file in different ways, various age groups opt for different methods. For example, among respondents between 18 and 24 years of age, nearly 21 percent do not file any taxes at all, a fact that could reflect the limited income earned during college or their status as dependents claimed on their parent or guardian’s taxes. After 24 years of age, the number of people who do not file drops significantly.

For people ages 25 to 44, tax software is by far the preferred filing method. This trend could result from the demographic’s affinity for technology or a simple unwillingness to spend money on accountants at this life stage. Additionally, younger filers tend to have relatively simple tax needs compared with older respondents, who are more likely to possess complicated portfolios and retirement savings accounts.

Perhaps because of their more complex financial situations, respondents over 55 are more likely to hire accountants than use software programs to file. Additionally, a discomfort with technology could prompt older filers to seek in-person assistance.

There is no right or wrong method by which to file taxes. Instead, each person has to choose the option best suited to his comfort level and personal circumstances. Do your research so you can feel confident in your choice.

Related: 8 Commonly Missed Tax Deductions

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