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Can I do taxes on the cheap?

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Photo by Dan Lassiter

Barb Steponkus asks questions of Nicholas Thies of Janesville while preparing his taxes at Steponkus Tax Service of Edgerton.

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Photo by Dan Lassiter

Nicholas Thies of Janesville shows some of his tax documentation to Barb Steponkus of Steponkus Tax Service as his friend Natalie Roling looks.

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Photo by Dan Lassiter

Barb Steponkus crunches some numbers while preparing taxes for a client at her Edgerton business.

JANESVILLE — "It's income tax time again, Americans: Time to gather up those receipts, get out those tax forms, sharpen up that pencil, and stab yourself in the aorta."—Columnist Dave Barry

Ha, ha, ha.

It'd be more funny if it wasn't so painful.

For the next two and a half months, Americans will be struggling with tax forms. It's an annual event, but this year's floundering economy has everyone looking for spare change in the sofa—and any deductions they can find.

Even doing your taxes can cost money.

Off-the-shelf tax preparation software and online programs cost anywhere from $19.95 to $75. Going to tax professional costs money, too, but sometimes you reap the benefits in unexpected deductions.

Of course, you always can do your own taxes with pencil, erasers, calculator and more erasers.

What's the best choice?

We asked local specialists to help us sort the choices and keep the most money.

Q: I find the IRS instructions impenetrable, and I'm bad at math. What are the options for me?

A: Most people can file their state and federal taxes online for free—and the electronic filing does the math for you.

For state taxes, go to www.dor.state.wi.us and click on "e-file."

The system supports all of the basic forms including form WI-Z, 1A, or 1. You also can file Schedule H, which is the Homestead Credit, electronically with form 1A and 1.

People who need to file more obscure forms such as "Schedule TC, Technology Zone Credits" or "Schedule HR, Historic Rehabilitation Credit" cannot file online.

If your adjusted gross income was $56,000 or less in 2008, you can file your federal taxes online, too. Go to www.irs.gov and click on "free file."

If you're not sure what your adjusted gross income is, start filing out the electronic form. After a few questions, you'll get the number.

Q: Can I still file over the phone?

A: No, sorry. Both the state and federal government have discontinued their "Telefile" programs.

Q: At what point is a tax professional absolutely necessary?

A: "It just depends on how comfortable you are with the forms," said Barb Steponkus of Steponkus Tax Service.

She's done people's EZ forms. She's also done some seriously complicated forms with more schedules than a train station.

Q: Why not just use a computer program, such as Turbo Tax?

A: "A lot of people are more comfortable with a person rather than a box to fill in," Steponkus said.

Besides, even the best tax prep program can't ask all of the questions. Or people might not understand what a legitimate deduction is.

For example, Steponkus was talking with a client about his taxes. In the course of conversation, the client mentioned he had visited a friend overseas and had developed a whole unit for his classroom about the trip. It turned out some of his trip expenses were deductible.

Another example: People affected by last summer's flooding might be eligible for additional deductions. Also, loss limitations were changed for flood victims, meaning they might be able to claim more losses.

Here's another one: Schools such as UW-Madison, UW-Rock County, UW-Whitewater and Blackhawk Technical College are included in the "Midwestern Disaster Area." People claiming education credits might be able to claim books, room and board and required supplies.

There's no guarantee that those items would be included in an off-the-shelf program. If you do plan to use those programs, do some research first.

Q: How do I pick a tax professional?

A: The IRS offered these tips:

-- Find out what the fees are in advance. Avoid preparers who base their fees on a percentage of your refund.

-- Tax professionals always should sign the tax return and provide a copy for your records.

-- Never sign a blank form.

-- Ask friends for references or check with the Better Business Bureau. See if the preparer belongs to a professional organization with a code of ethics. Ask, too, about his or her level of experience and title.

Remember, you are legally responsible for what's on your tax form, no matter who prepares it.

Q: Anything else to watch out for?

A: Rod Benstead, director of Consumer Credit Counseling of Beloit and Janesville, advised people to avoid the lure of refund anticipation loans.

Such loans allow people to borrow money against their refunds for a fee above and beyond what they paid for the tax professional's services.

Often those fees amount to 200 percent or 300 percent interest.

"I can see why refund anticipation loans are popular," Benstead said. "But if I offered to take a chunk of your paycheck and then charged you 300 percent interest to get it back, would you do it? It's really not very financially savvy."

With electronic filing, you could get your refund in as little as two weeks.

Q: I'm a senior citizen living on a fixed income. Who can help me?

A: "The question I get all the time is, ‘Do I really need to file?'" said Julie Seeman, information and assistance specialist with the Rock County Council on Aging.

Generally, the IRS requires most people to file a federal income tax return every year. The agency bases its filing requirements for a given tax year on income.

For people age 65 or older or blind, the filing requirements are more lenient because they can earn additional income and not have to file.

AARP will be offering tax help at senior centers throughout Rock County. Call for an appointment:

-- Janesville Senior Center: (608) 755-3040.

-- Beloit Senior Center: (608) 364-2875.

-- Evansville Senior Center: (608) 882-0407.

-- Milton Gathering Place: (608) 868-3500.

Many seniors qualify to file Schedule H, a housing benefit, and can get help preparing that form. Call the Council on Aging for more information: (608) 757-5472.

Blackhawk Technical College's accounting students along with instructor Bill Burwitz again will give tax preparation assistance for area residents.

The services are intended for low-income and elderly citizens.

Students use electronic tax filing software to process tax return information to the IRS and state.

Call (608) 743-4577 and leave contact information on the voice mail system.

Appointments are limited, and clients are accepted on a first-come, first-served basis.

Q: What other options should we know about?

A: Hedberg Public Library in Janesville and other libraries throughout the Arrowhead System can help you download forms and find instructions.