Why Aren't You Doing Your Own Taxes?

Second, determine which form you need to file -- 1040EZ (the simplest), 1040A (simple) or the full 1040. Read it over and keep in mind the overall order of the form; it's essentially the same order as the tax calculation. You start with income, subtract adjustments (like pretax contributions to an IRA or 401(k)). That's your adjusted gross income (AGI).

Next, you'll whittle your AGI down through whatever deductions you're eligible for. The number you eventually get is your taxable income. Determine the tax you owe, subtract the tax you've already paid and subtract any credits you're eligible for. The forms are numbered, and each number corresponds to an explanation in the instruction book.

You'll probably have to file schedules, which are separate forms for common tax issues, such as itemizing deductions (Schedule A), running a side or home business (Schedule C) or reporting capital gains (Schedule D).

When You Need Help

Now, we're not saying doing your own taxes is easy. It can be tough to slog through at times, but there's a wealth of information at your disposal. A particularly good source is J.K. Lasser's Your Income Tax, and of course there's the Internal Revenue Service's Web site, www.irs.gov.

The chain preparers are certainly a viable alternative for those looking for the easy way out, but if you have a complicated return or require some strategizing and planning, you're likely better off with a CPA.

If you own a business that has a lot of assets and a sizeable payroll, for instance, a CPA is probably the way to go. The same is true if you're dealing with estate issues. Major life changes such as a divorce, first child or a major casualty might require more careful analysis that CPAs specialize in.

If you decide you need help, make sure you understand the interpretations and decisions your preparer is making. You also need to be comfortable with your preparer's level of aggressiveness. After all, you're the one ultimately responsible for your return.

All the more reason for you to understand what goes into it.

>To order reprints of this article, click here: Reprints