Author Topic: Do you do your own taxes?  (Read 7490 times)

Emergo

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Do you do your own taxes?
« on: December 21, 2015, 03:33:32 PM »
Tax Refund season is coming up soon. In the past, I've always had a friend's friend do my taxes ever since I started working.

Taxes in the past has always been easy to do for me because I'm single and don't have a dependent or a mortgage. I usually pay this woman $25 to do it for me.

This year will be a little complicated because I started doing what y'all taught me. Max my 401k, and contribute to IRA (which I'm going to do this week) and then non-tax advantaged accounts. (hope I'm doing this right)

So with these changes and all the deductibles and whatnot, is there a different approach I should go about getting my tax refunds?

I don't want to get arrested by IRS if I put in the wrong amounts myself...

BTW, here is my old thread if there is anything you can contribute there.
http://forum.mrmoneymustache.com/ask-a-mustachian/1st-post-new-to-mmm-started-with-0-feels-like-i'm-saving-too-slow-need-help/

dandarc

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Re: Do you do your own taxes?
« Reply #1 on: December 21, 2015, 03:39:57 PM »
I'm for doing your own taxes.  No better way to learn than to fill the forms out yourself.  Every single deduction / credit we talk about here has a line a 1040 and detailed instructions.

And you won't be arrested if you make a mistake.  You'll owe back taxes and any penalties / interest.  Or you could even get a refund!  Mistakes cut both ways.  Basically, the only way to get arrested over your taxes is to commit fraud.

therethere

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Re: Do you do your own taxes?
« Reply #2 on: December 21, 2015, 03:48:55 PM »
Definitely do your own taxes so you understand it better. Especially since you have the easiest taxes ever! Tax prep programs are usually free and are incredibly simple. I've used both turbotax and HR block and they are essentially the same thing. They just have you transcribe numbers from your W2, 1099's, and whatever other paperwork you get mailed. Knowing a little bit about taxes helps you plan throughout the year so you aren't under or over-witholding which is great for peace of mind.

jac941

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Re: Do you do your own taxes?
« Reply #3 on: December 21, 2015, 03:54:22 PM »
Doing your own isn't too bad as long as you follow the instructions. We did our own until things got really complicated (house, kids, ordinary and investment income, charitable contributions, etc). Now we use Turbo Tax which simplifies things and we pay a lot less than what we'd pay a person. That might be a good compromise for you if you're feeling really overwhelmed trying to do it on paper.

And it shouldn't be tax "refund" season - you're aiming to break even. If you get a big refund, it just means that you gave the government an interest-free loan during 2015 and you should set your withholdings lower next year. That's money that you could have invested months ago that could be earning for you today!

v8rx7guy

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Re: Do you do your own taxes?
« Reply #4 on: December 21, 2015, 04:01:17 PM »
I do them myself with Turbotax.  I have been studying the subject of taxes a lot this past year and I'm nearly ready to be a "real badass" and fill out my 1040 and Schedule A & E "by hand".  Maybe next year... I'll do that.

Frankies Girl

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Re: Do you do your own taxes?
« Reply #5 on: December 21, 2015, 04:11:06 PM »
I do my own taxes and have done so since I was 15 and first started working. I now use TurboTax to streamline everything, but it is still me figuring out what numbers go where (sort of).

I have slightly more complicated stuff as over the years I've ended up with things like several investment accounts, large medical expenses, inherited IRA distribution, sold an inherited house that we also put in lots of capital to fix up (that was fun figuring out) qualified and non-qualified dividends, K-1 forms and all sorts of crazy stuff... still muddled through and am 99.9% sure I did things correctly.

And I personally think it is really badass of me to be able to do this stuff, so hell yeah you should be doing your own taxes!!

Basic taxes for a single income with no frills? Piece of cake using a (free) tax program. And I am NOT a math or engineer so if I can do it, any one can.

You won't be arrested for getting things wrong unless you're falsifying things. At most, they'll assess a penalty for a truly boneheaded screwup if it means you underpaid or left off something major, but you'd really have to work hard to do even that. They can tell the difference between doing something boneheaded and hinky/fraud stuff. And honestly you'd have to be trying to screw up your taxes if you have a pretty straightforward situation like what you describe.

It's free to use the online TurboTax basic program and efile, so you could try it out and see if it matches up with your returns in the past. As soon as you get your W2 and any investment or other 1099s you can start the process (you don't have to wait until April to file, and you don't have to complete the form as it will let you save your progress). And of course, save all of your documents in a folder once you're finished (hardcopy or electronic) labeled with the tax year so you can find them easily).


Zikoris

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Re: Do you do your own taxes?
« Reply #6 on: December 21, 2015, 04:21:41 PM »
I've always done my own taxes. I use StudioTax (Canada), which is free, and it never takes me more than an hour to do both mine and my boyfriend's together. The programs make it incredibly easy and walk you through it step by step.

Paul der Krake

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Re: Do you do your own taxes?
« Reply #7 on: December 21, 2015, 04:31:04 PM »
By hand. Cannot recommend it enough to anyone with an interest in tax optimization, which should be every one who reads this. Start when you're young and it's easy, by the time complicated life scenarios roll around, it will be a lot more comfortable from the experience gained in the previous years.

Using turbotax is not "doing your taxes yourself".

johnny847

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Re: Do you do your own taxes?
« Reply #8 on: December 21, 2015, 04:46:07 PM »
I started doing them by hand once I got a job that I can support myself with.

Along the lines of what Paul said, there is no better way to learn about the tax code (and plan ahead for future years) than to do your taxes yourself, by hand (using software doesn't count).


From what you described OP, your taxes should still be a piece of cake. Maxing your 401k has actually no extra reporting requirement (if you made traditional contributions, your W-2 will report income that already has your 401k contributions taken out. If you made Roth contributions, well it has no effect on your current year's taxes anyway so there's nothing to report there either).
You'd have to report a traditional IRA contribution, which is just an extra line you have to fill out.
You said you contributed to non-tax advantaged accounts. Meaning you probably got some dividends. Your brokerage will send you forms (1099-DIV and one other one for capital gains) telling you how much you received in dividends and capital gains distributions (if applicable). As long as you didn't sell anything, you don't even need schedule D or the full 1040. That's just two, possibly three extra lines - one for dividends, one for qualified dividends (your 1099 DIV will tell you these amounts), and one for capital gains distributions if you had any.

TrMama

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Re: Do you do your own taxes?
« Reply #9 on: December 21, 2015, 05:07:26 PM »
Yes, you should absolutely do them yourself. Not just to save the $25, but so that you can learn more about how they work. This will let you plan strategically in the future so you can make decisions that lead to paying less taxes. That saves way more than $25/yr.

Start doing it now, while your situation is still simple. Then, as your life gets more complicated, it won't be so intimidating.

Emergo

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Re: Do you do your own taxes?
« Reply #10 on: December 21, 2015, 05:15:52 PM »
So where exactly do I start that I should do it myself? I usually just hand off my friend's friend this paper given to me from my company.

Helvegen

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Re: Do you do your own taxes?
« Reply #11 on: December 21, 2015, 05:27:21 PM »
I do them myself, but our taxes are fairly uncomplicated.

johnny847

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Re: Do you do your own taxes?
« Reply #12 on: December 21, 2015, 05:27:29 PM »
Go download the 1040 and the associated instructions from the IRS website (note the 2015 form and instructions aren't out yet, but there are typically few changes from year to year).

MDM

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Re: Do you do your own taxes?
« Reply #13 on: December 21, 2015, 07:03:50 PM »
By hand. Cannot recommend it enough to anyone with an interest in tax optimization, which should be every one who reads this. Start when you're young and it's easy, by the time complicated life scenarios roll around, it will be a lot more comfortable from the experience gained in the previous years.

Using turbotax is not "doing your taxes yourself".
+1

With the qualifier that building your own spreadsheet to do the math still qualifies as "by hand." :)

E.g., see http://forum.mrmoneymustache.com/ask-a-mustachian/turbo-tax-vs-cpa/ and http://forum.mrmoneymustache.com/taxes/best-way-to-calculate-w-4-exemptions-for-2016/.

johnny847

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Re: Do you do your own taxes?
« Reply #14 on: December 21, 2015, 07:25:34 PM »
By hand. Cannot recommend it enough to anyone with an interest in tax optimization, which should be every one who reads this. Start when you're young and it's easy, by the time complicated life scenarios roll around, it will be a lot more comfortable from the experience gained in the previous years.

Using turbotax is not "doing your taxes yourself".
+1

With the qualifier that building your own spreadsheet to do the math still qualifies as "by hand." :)

E.g., see http://forum.mrmoneymustache.com/ask-a-mustachian/turbo-tax-vs-cpa/ and http://forum.mrmoneymustache.com/taxes/best-way-to-calculate-w-4-exemptions-for-2016/.

I agree. But I would also like to say, using someone else's spreadsheet counts as using turbotax ;)

MrSal

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Re: Do you do your own taxes?
« Reply #15 on: December 21, 2015, 07:43:37 PM »
For those that say to save the 25 USD a year and do ourselves... i am new in the country but my belief is that isn;t it filing electronically way faster?

As I understand, filing electronically you get refunded within 20 days or less. Doing it by paper... it takes almost 8 weeks to get a refund! I had to do paper last year and thats how long it took.

Is there a way to file lectroincaly without paying turbotax or some other program? I know there are free versions but these are limited versions depending on your income. In all of them both my wife and I are not eligible.

SomedayStache

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Re: Do you do your own taxes?
« Reply #16 on: December 21, 2015, 07:48:34 PM »
Everyone can use the irs free fillable forms and file electronically.  I would link you, but I can't on my phone.  This isn't exactly tax software, but just a clunky online version of the paper forms , but allows you to file electronically without going through a paid software.

MDM

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Re: Do you do your own taxes?
« Reply #17 on: December 21, 2015, 08:48:06 PM »
I agree. But I would also like to say, using someone else's spreadsheet counts as using turbotax ;)

Maybe so. :)

The more one just fills in the blanks and accepts the results, the more "not really by hand."

The more one understands and validates the formulas (particularly when creating a new year's set of calculations), the more one qualifies for do-it-yourself recognition.

But I do bow and defer to those who do it with a slide rule!

teen persuasion

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Re: Do you do your own taxes?
« Reply #18 on: December 21, 2015, 09:35:40 PM »
Another vote to do it yourself, by hand, to learn.  Then run it thru a SW version so you can efile, and as a double check.

I do it by hand, to see what result I get, then go thru TurboTax or whatever one is approved by my state each year for "free file", just to efile.  Their answer better match mine, since I trust my calculations more than theirs.

I walked my kids thru their taxes as young as 15, once they had their first job (and have stock dividends to claim).  It got more interesting for each of them once they were in college and no longer dependents, but I let them do it themselves and checked it over for them.  The college stuff is the most complicated parts of ours, balancing the kids' returns/refunds and ours and FAFSA implications all at the same time (as well as EITC and CTC and state versions of all).  It's still not THAT hard to figure, just lots more forms for me to include.  Just go line by line, and you may find that some, maybe many, lines don't apply to you right now.  That's normal.

JJNL

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Re: Do you do your own taxes?
« Reply #19 on: December 21, 2015, 11:44:57 PM »
I say do them yourself and learn - but I am speaking from a country where the tax man makes it incredibly easy to do your own taxes, especially if you do not own your own company but work for wages like I do. Pretty much all the needed financial data are transmitted to the tax authorities by your employer (your wages, the deductions they made etc.) and your bank (how much money do you have in your accounts and your mortgage). The tax man favours doing your taxes digitally: there's a secure web app provided for that, and all the numbers they already know are filled in already. Mostly, you only have to check if they've done it right and fill in your deductibles (like medical expenses, tuition, repairs on your house etc). and you're done. Easy-peasy, though sometimes a bit scary: last year I was confronted by the fact that I still had a bank account in Belgium from when I lived there 10 years ago, which I had totally forgotten about but which did wind up on my tax returns...

BrickByBrick

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Re: Do you do your own taxes?
« Reply #20 on: December 22, 2015, 06:50:08 AM »
Ditto as most people have said, I did my taxes by hand last year for the first time - even though I'm just filing as single with no dependents - it took me a few hours due to triple checking.  However I learned a lot and actually understood what I was inputting and why by the end of it.  My situation this year is practically the same as last year, so I expect it to only take an hour at most.

thd7t

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Re: Do you do your own taxes?
« Reply #21 on: December 22, 2015, 06:55:45 AM »
Emergo, it sounds like your taxes should be extremely easy, even with your additional information.  It might take a few hours, but I doubt it.  My wife and I switch off doing our taxes and have never had an issue.  I'm actually a little excited, because we have some changes this year that will add some layers of (probably beneficial) complication.

Jack

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Re: Do you do your own taxes?
« Reply #22 on: December 22, 2015, 08:00:12 AM »
Another vote to do it yourself, by hand, to learn.  Then run it thru a SW version so you can efile, and as a double check.

I do it by hand, to see what result I get, then go thru TurboTax or whatever one is approved by my state each year for "free file", just to efile.  Their answer better match mine, since I trust my calculations more than theirs.

+1, although when I say "by hand," I really mean "by Excel LibreOffice Calc." The other advantage of a spreadsheet is that it makes it easy to calculate different scenarios (married filing jointly vs. married filing separately, itemizing vs. standard deduction, Roth IRA vs. traditional, etc.).

I'd happily use the IRS Fillable Forms, but when I do that I have to mail in a paper state tax return. I'd just like to say FUCK TurboTax for lobbying to make this bullshit necessary! (And fuck the Georgia Department of Revenue for not having a state equivalent of Fillable Forms!)

johnny847

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Re: Do you do your own taxes?
« Reply #23 on: December 22, 2015, 08:43:11 AM »
I'd happily use the IRS Fillable Forms, but when I do that I have to mail in a paper state tax return. I'd just like to say FUCK TurboTax for lobbying to make this bullshit necessary! (And fuck the Georgia Department of Revenue for not having a state equivalent of Fillable Forms!)

I'm with you on this one. I've had to mail in my Georgia tax returns.

It's the 21st century. There is no need for this!

zolotiyeruki

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Re: Do you do your own taxes?
« Reply #24 on: December 22, 2015, 10:39:45 AM »
By hand. Cannot recommend it enough to anyone with an interest in tax optimization, which should be every one who reads this. Start when you're young and it's easy, by the time complicated life scenarios roll around, it will be a lot more comfortable from the experience gained in the previous years.

Using turbotax is not "doing your taxes yourself".
QFT.  Of course, I'm a total geek, and in the 47%, so I actually *enjoy* doing my taxes.  It sounds like OP still has a very simple return--the only things that might be more complex for OP than a "I'm single, standard deductions, etc" return would be potential investment income (add a single number) and tIRA contributions (subtract a single number).

ketchup

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Re: Do you do your own taxes?
« Reply #25 on: December 22, 2015, 11:12:35 AM »
I always do mine myself, as mine are pretty braindead simple (W-2).

This will be my girlfriend's first year of filing as self-employed with a bunch of deductible business expenses, so that should be fun to mesh together (it's pretty well-organized as it stands, but it'll just be a matter of putting everything together).

Tjat

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Re: Do you do your own taxes?
« Reply #26 on: December 22, 2015, 11:29:09 AM »
TaxAct is the same as turbotax but <$20. Though with your situation being so simple, you may be able to file for free using turbotax.

It holds your hand through the entire process.

Trudie

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Re: Do you do your own taxes?
« Reply #27 on: December 23, 2015, 03:11:05 PM »
I've done my own for years using TurboTax and now TaxAct (which is cheaper!)

These programs help lead you through and it's a good way to learn.  I would add that another really great reason to do your own is so that you can understand the math that goes into figuring deductions, credits, and taxable income.  This can make you more forward-thinking with your tax strategy.

For instance, there are advantages to staying in the 15% tax bracket (taxable income of 74.9K for a married couple), such as no long term capital gains taxes, in addition to lower ordinary income rates.  Doing your own enables you to strategize where you're at, throughout the year and modify deductions to stay in this sweet spot.  I've even opened up hypothetical tax returns in my TurboTax software to model different scenarios to see how the numbers flow through.

It will also give you more confidence.  College financial aid, multiple income tax credits, and health care subsidies are all calculated based on certain lines of your tax return.  Once you understand this, you will feel like you have more control over your life and your financial freedom.

I am a CPA, and I can honestly say that the companies I have worked for have been lucky recipients of random audits and dispute letters from the IRS -- often it has to do with a shortage of resources on their side and they just need further clarification of an issue.  While I understand the anxiety, I would say that as long as you file your returns and don't do anything purposefully shady to underreport income, you'll be fine.  They understand that people make mistakes and you have opportunities to correct them.

AlwaysLearningToSave

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Re: Do you do your own taxes?
« Reply #28 on: December 23, 2015, 03:20:32 PM »
By hand. Cannot recommend it enough to anyone with an interest in tax optimization, which should be every one who reads this. Start when you're young and it's easy, by the time complicated life scenarios roll around, it will be a lot more comfortable from the experience gained in the previous years.

Using turbotax is not "doing your taxes yourself".
+1

With the qualifier that building your own spreadsheet to do the math still qualifies as "by hand." :)

E.g., see http://forum.mrmoneymustache.com/ask-a-mustachian/turbo-tax-vs-cpa/ and http://forum.mrmoneymustache.com/taxes/best-way-to-calculate-w-4-exemptions-for-2016/.

I agree. But I would also like to say, using someone else's spreadsheet counts as using turbotax ;)

As the person who built my own spreadsheet under MDM's tutelage in the second thread MDM linked, I absolutely recommend doing it yourself by building your own spreadsheet.  I am not super spreadsheet-savvy, but creating the spreadsheet forced me to deeply understand how the 1040 works.  Plus, now I have my own handy tool for testing how different assumptions affect my tax liability.  Then, take it one step further and do payroll calculations. 

onlykelsey

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Re: Do you do your own taxes?
« Reply #29 on: December 23, 2015, 03:25:14 PM »
I started paying someone ($300/year, if anyone's curious, including impromptu occasional "what about this???" calls) two years ago.  This may be nonsensical, but since I'm a lawyer, I feel like the IRS would be less willing to accept the excuse that I accidentally messed something up or missed an item.

Honestly, I sort of love it.  He also provides me with a yearly writeup about my effective tax rate, whether I almost got hit with AMT, etc. 

Frugalman19

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Re: Do you do your own taxes?
« Reply #30 on: December 24, 2015, 08:03:41 AM »
Fair warning I do taxes for a living,

I will say if your tax situation is simple, doing your taxes yourself is the way to go, there are free sites connected to the IRS website that will walk you through simply putting in a w-2.

If your tax situation is complicated in any way, pay the money and go to a professional. I cannot tell you how many times people I know have come to me after doing their taxes for years and make huge mistakes. I always tell this story, I had someone call me from elementary school that did her and her husbands taxes on turbo tax, and had a question. She checked a wrong box somewhere or put something in the a wrong box, that made a $4,000 difference for federal refund alone. That one mistake would have paid for 10 years of tax prep. It's a no brainer.

I see this stuff all the time, mostly its men who have an ego problem and don't want to have someone else have some sort of say in how things are going in their life. I've seen many overconfident men totally hose up their families returns.

Cathy

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Re: Do you do your own taxes?
« Reply #31 on: December 24, 2015, 11:01:15 AM »
I started paying someone ... two years ago. This may be nonsensical, but since I'm a lawyer, I feel like the IRS would be less willing to accept the excuse that I accidentally messed something up or missed an item.

Even having a professional prepare your tax return may not help you if your case is heard by the Ninth Circuit. According to the Court, a person with a law degree is expected to be familiar at least with the Internal Revenue Code and the Treasury regulations, even when represented by a lawyer themselves:

                      ... Taxpayers argue that the Tax Court improperly imposed a 20 percent accuracy-related negligence penalty under 26 U.S.C. 6662(a). ... Even if Taxpayers' ignorance of the [law] was in good faith, it was not clear error for the Tax Court to find that Taxpayers "did not have reasonable cause for claiming a charitable-contribution deduction" because Minnick has a law degree and reading the Treasury Regulation would have given him notice that subordination may have been required.
Minnick v. Commissioner, No 13-73234 at *4, 611 Fed Appx 477, 478-79, 2015 US App LEXIS 14118 at *4 (9th Cir Aug 12, 2015) (emphasis added).

Mr. Minnick was represented by a licensed attorney in the preparation of his tax return and through all stages of the litigation, but the Court still thought it was Mr. Minnick's responsibility to know the law, simply because he "has a law degree". That said, this is an unpublished opinion and the quoted reasoning is probably not good law; the Court did not cite, state, or analyse any of the principles relevant to the question of reasonable cause but simply asserted that Minnick should have known the law.

Even though the Court's legal reasoning may not have been sound, the judges do have a point: if you are trained in the law, nothing stops you from reading the tax code, the regulations, and the case law yourself. Tax is just another area of law; it is not a mystic dark art. Indeed, the Supreme Court has spoken out against so-called "tax exceptionalism", and has noted that the same principles govern tax law as other areas of law. See, e.g., Mayo Foundation v. United States, 562 US 44, 131 S Ct 704, 713 (2011) ("[W]e are not inclined to carve out an approach to administrative review good for tax law only.").

Of course, not everybody has an interest in becoming a polymath, and a lot of tax issues are quite complicated, so many people would be well-served by the retention of counsel (hence why I frequently recommend it in my posts here).
« Last Edit: December 24, 2015, 07:29:42 PM by Cathy »

robartsd

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Re: Do you do your own taxes?
« Reply #32 on: December 24, 2015, 11:27:08 AM »
I've always filed my own taxes. The most complex so far was during my teen years as an "Indepentent Carrier Contractor" delivering the local daily newspaper - I filed as self employed in a cash accounting business that does not keep an inventory - figuring that out and learning about "self employment tax" while in high school was not fun. Now I use one of the many free online federal income tax services (the kind that try to sell you extras like filing your state taxes and bound printed copies of your return) and my state's own free online tax filing website - completely free electronic filing.