There's a video on the Web site for H&R Block, the national chain of tax preparation stores to promote its new smartphone app, the H&R Block at Home 1040EZ (try saying that 10 times fast). In the video, a twentysomething man in trendy black glasses takes a seat in a coffee shop with his smartphone in hand. He orders a coffee while tapping open the H&R Block app.
While the waitress retrieves his caramel macchiato, our young hero uses his smartphone camera to take a picture of his W-2 form. The app automatically fills in his 1040EZ tax return with nothing but the image of his W-2. Pretty cool! By the time the waitress return with his 240-calorie cup of Joe, our man has not only prepared his tax return, but filed it with the Internal Revenue Service (IRS). For free!
Compare this highly fictional income tax experience with your own. How long did it take you to prepare and file your taxes last year? (The IRS estimates that the average return takes 23 hours to file, including the assembling of tax-related documents [source: Kristof].) Was it free? Did you do your taxes in a coffee shop? Did you have a smug smile on your face the whole time? Was the whole process finished in less time than the typical round of "Angry Birds?"
If not, then it's time to put the "smart" back in your smartphone. We've assembled a list of mostly free and surprisingly useful tax day apps that can help you track your expenses, organize your tax information, and even file anywhere for free, perhaps from the comfort of a coffee shop, or even better, Tahiti.
This free app from the makers of TurboTax can help you estimate how much you will owe in federal taxes this year. The app, which is available for the iPhone, iPad and Android phones, uses TurboTax's patented step-by-step walkthrough to figure out how much money you made during the tax year and how many deductions and credits you can claim.
Questions are straightforward; most of the answers can be found on your paystub, your W-2 form, or off the top of your head ("How many children do I have again?"). Your tax status is displayed with a continuously updated gauge that swings from red (you owe money) to green (you're getting a refund) as you answer more questions [source: Cabebe].
While the calculations aren't official -- don't make a down payment on that hot air balloon just yet -- it's a fun and simple way to get a tax day preview.
H&R Block at Home 1040EZ
H&R Block at Home 1040EZ is a free app for preparing and filing a 1040EZ income tax return. The 1040EZ return is reserved for a select group of taxpayers with straightforward income and no itemized deductions. The following must be true if you want to file the 1040EZ:
You can also use the app to snap a picture of your W-2 form with your smartphone and automatically transfer all of the information to your tax return. It's a real time saver, especially if you're not a speedy thumb-typer.
TurboTax has a loyal following, thanks in part to its cleanly designed interface and simple language. There are a number of apps out there designed to help you check your refund status, but the MyTaxRefund app from TurboTax has several features that sets it apart. The app is free for iPhone, iPad and Android phones and can help you check the status of your federal and state filings whether you're a TurboTax user or not.
After you enter some basic information, the app can tell you whether your federal and state tax returns have been accepted, rejected or are still pending. Pending could mean a lot of things, most likely that you are checking too early. But "rejected" is cause for concern. Many tax returns "bounce back" from the Internal Revenue Service (IRS) because of a typo like a misspelled name, Social Security number or taxpayer identification number (TIN). The app can walk you through the process for contacting the IRS to amend your return [source: TurboTax].
But perhaps the most-used feature of the app is to estimate the arrival date of your refund check. Again, this isn't an exact science, but the app uses average IRS processing times to predict arrival dates for either refund checks or direct deposit.
Give the Internal Revenue Service (IRS) some credit: With e-filing, they've greatly streamlined the tax preparation process. An unlucky few of us still remember the days of filling out tax forms by hand and stumbling through complex calculations that could mean the difference between a refund and possible jail time. So even if the IRS2GO app isn't exactly revolutionary, cut the feds a break.
The IRS2GO app, which is free for iPhone, iPad and Android phones, is mostly for checking your refund status. You can also stream helpful videos from the IRS YouTube channel (that's entertainment!) and follow the IRS Twitter feed (ditto!).
If you want to save yourself a toll-free phone call to the IRS, you can also use the app to request two free documents: a tax return transcript or a tax account transcript. Apparently, there's a difference. A tax return transcript is basically a copy of your tax return, while a tax account transcript contains most of the important information from your tax return, plus any amendments or changes made by either you or the IRS after you filed your return. Both will be mailed out to you for free and can be useful when proving income to mortgage lenders or student loan providers.
Another free app from Intuit, the makers of TurboTax, the EITC Finder helps you determine if you qualify for the Earned Income Tax Credit (EITC) and how much you should expect to receive from the federal and state government.
The EITC is reserved for moderate-to-low-income working American families. The tax credit, which was created in 1975, helps to keep struggling families above the poverty line. In fact, the EITC is widely considered the most effective anti-poverty measure employed by the federal government, keeping millions out of poverty each year. In 2010, 26.8 million Americans received an EITC for a total of $59.5 billion [source: Internal Revenue Service]. Unfortunately, not everyone who qualifies for the EITC actually claims it. The IRS estimates that one out of five qualifying families misses out.
If you make less than $50,000 a year, the EITC finder can help you determine if you qualify. The app will walk you through all of the qualifying questions, including those about your family, filing status, residency status and income. To claim the maximum federal credit ($5,751 in 2011), you would need to make around $15,000 a year and have three or more children. Several states offer their own EITC credits, too.
You pull up to Goodwill to drop off three bags full of old baby clothes, an old recliner and a set of silverware. The attendant asks if you want a receipt. You know you need a receipt if you want to deduct these non-cash charitable donations from your taxable income, but do you have any idea what three bags of baby clothes are worth? Rather than miss out on a deduction, download the iDonatedIt app and let your smartphone do its smart thing.
iDonatedIt costs $2.99 for both the iPhone and Android phones, but it's well worth the sticker price. Enter your donated items, answer a few questions about their age and condition, and the app will calculate a fair market value. You can even snap a picture of the item to save with your digital receipt. When tax day rolls around, you don't have to dig through your receipt shoebox to total up your charitable contributions. You can just scroll through the iDonatedIt app and relive memories of generosities past.
Charitable donations to approved organizations are 100 percent deductible from your taxable income. That includes most religious organizations and other tax-exempt institutions. If you are unsure of the status of a particular organization, you can use the searchable IRS Exempt Organizations Select Check to double check.
Mint.com is a hugely popular website for personal finance and budgeting. The site automatically syncs with your bank account, credit cards and investment accounts to give you an accurate, real-time look at the state of your finances. And now, many of the most useful features of the site -- automatic categorization of transactions, interactive budgets and graphs -- are included in the free Mint app.
For tax purposes, two of the most useful features of the Mint app -- available on iPhone, iPad and Android phones -- are the categorizing and tagging features. Mint does a great job of tracking and categorizing everything that you pay for with your credit card. If you use a business credit card for all business expenses, then those charges will be automatically categorized as such. When it's time to calculate your itemized business deductions, it's all right there.
You can use the app to tag transactions that aren't automatically categorized as tax-deductible. Create specific tags for different tax-deductible expenses: medical expenses, charitable donations, property taxes, etc. When it's time to total up your expenses, you can simply sort by the tags you've created.
This useful app for the iPhone, Android phones and (soon) BlackBerry should be called "receipt organizer." The most useful feature of Tax Organizer is its ability to snap a photo of a receipt and save it as a tax-deductible expense.
Tax Organizer is a life-saver for folks who travel a lot for business and need to expense lots of meals, rental cars, mileage, entertainment and more. The app lets you quickly enter the pertinent information for each transaction -- what Tax Organizer's creators called the "5 Ws": who, what, where, when and why it's tax deductible. Then you snap a picture of the receipt and it's all saved in one place.
Tax organizer is free for 30 days, but then you need to choose between the Basic Plan ($14.95 a month) or the Premium Plan ($19.95 a month). Both plans will automatically back up your saved receipts "in the cloud," while the premium plan is marketed to folks who manage lots of rental properties. Under that plan, you can use the app to manage up to 15 different properties, each with its own list of categorized expenses.
Ask a CPA
Accountants aren't cheap. That's why so many Americans choose to do their taxes themselves, for better or worse. But wouldn't it be great if you had a CPA cousin you could call for free advice, or at least someone to translate the IRS gibberish into real English? The Ask a CPA app might be the next best thing.
This free tax reference tool for the iPhone and iPad features a searchable and browse-able database of tax terms and plain-English explanations. Categories include adoption expenses, C corporations, casualty losses, household employees, rental expenses and many more. But even better, if you can't find an answer in the database, you can ask the app a question that will be answered directly by a CPA in your area. If you think you need additional help, the app can refer you to a local registered CPA in the flesh.
While there are several tax reference apps available, Ask a CPA gets rave reviews in the iTunes store -- even from accountants.
You receive a receipt for just about every purchase you make. Whether you're buying groceries, filling up the car with gas or buying an e-book on Amazon, you expect a slip of paper or at least an e-mail confirming the purchase and detailing the cost. So why don't you get a receipt from the federal government when you pay taxes?
The taxes you fork over to the federal government help to pay for everything in the federal budget, including national defense, Social Security, Medicare, public education and hefty interest payments on the national debt. But few taxpayers have any idea how much of their money goes to each of these programs. Wouldn't it be nice to get an itemized receipt showing exactly how your tax dollars are spent? That's what the Tax Receipt app is for.
Simply enter your basic tax information -- income, deductions and dependents -- and this free app for Android phones will break your tax bill down into every major and minor government expense. If you pay $8,500 in federal taxes annually, then $1,500 of that will go to Social Security, over $1,000 to Medicare and almost $900 to the Department of Defense. You might be surprised to see that only $185 goes to public K-12 education, but more than $400 is spent covering the interest on our national debt.
For lots more information about income taxes, the Internal Revenue Service and how to survive tax day, explore the links on the next page.
Many Americans don't think about their tax bills until the new year. But there are things you need to do before Dec. 31 if you want to pay less later.
- Cabebe, Jaymar. CNET. "Get a jump on your taxes with these TurboTax-powered apps." February 24, 2012 (March 10, 2012.) http://download.cnet.com/tax-guide/
- H&R Block. Google Play. "H&R Block at Home 1040EZ." (March 10, 2012.) https://play.google.com/store/apps/details?id=com.hrblock.AtHome_1040EZ&feature=search_result#?t=W251bGwsMSwyLDEsImNvbS5ocmJsb2NrLkF0SG9tZV8xMDQwRVoiXQ..
- Internal Revenue Service. "About EITC." (March 10, 2012.) http://www.eitc.irs.gov/central/abouteitc/
- Kristof, Kathy M. Los Angeles Times. "Tax changes for health insurance buyers, home buyers and the unemployed." May 27, 2011 (March 11, 2012.) http://articles.latimes.com/2011/mar/27/business/la-fi-perfin-20110327
- TurboTax. "Resolving an E-filing Rejection." February 24, 2012 (March 12, 2012.) http://turbotax.intuit.com/support/iq/Efile-status/Resolve-an-E-filing-Rejection/GEN12475.html