Doing your taxes on your own can be quick and painless. And, even though we’re in the same market, we don’t hate TurboTax® as you would think. In fact, we envy the product they’ve built!
Plus, we’re also not the type of people to steer you away from doing your taxes yourself. If you’re already comfortable with do-it-yourself software and have a fairly simple set of tax returns, have at it.
With that said, lately, we have seen an uptick in new clients who come to us with one common problem. So much that we decided to do a blog article on it.
There are key tax returns that your do-it-yourself tax software does not do.
Yes, you read that right. Most think that filing their Federal 1040 return and their state tax return is all they need to do. But you may be missing another key tax return: your local tax return.
What’s a Local Tax Return?
A local tax return is another annual tax return, in addition to your Federal and state tax returns.
If you live in any of the following states, you may also have a local tax return to file:
- Alabama
- Arkansas
- Colorado
- Delaware
- Indiana
- Iowa
- Kentucky
- Maryland
- Michigan
- Missouri
- New Jersey
- New York
- Ohio
- Oregon
- Pennsylvania
- West Virginia
Bear in mind that some rules are different than others, depending upon which state you live in.
For example, New York’s local return regulations generally only apply to those that live or work in New York City or Yonkers.
On the contrary, Pennsylvania has hundreds of different jurisdictions and tax collectors that are sorted only by where you live, down to the school district and municipality. Even the tax rates differ depending on where you live.
Okay, Why Do I Care?
This brings us back to our original point – if you live or work in one of the sixteen states we mentioned previously, do-it-yourself software like TurboTax® is generally completely missing your local tax return.
As an example, Boundless Tax is headquartered in Pennsylvania, so we’ll use that as an example: Do-it-yourself software will only do your Federal and Pennsylvania state tax returns.
In Pennsylvania, there is a third tax return called a Local Earned Income Tax Return that is due at the same time as your Federal and state tax returns (April 15th of each year).
Pennsylvania has hundreds of different local tax jurisdictions, local tax rates, and local tax collectors. If you live at our office in Bethlehem, your wages are subject to a 1.25% local tax rate, and you pay Keystone Collections Group. The next town over pays only a 1% local tax rate and pays a company called Berkheimer.
If you live in Philadelphia, you are subject to different (higher) tax rates and you pay the Philadelphia Department of Revenue.
See how complicated this can get really quickly?
This is one of the main reasons do-it-yourself software does not assist you with these returns. Pennsylvania is just one example of sixteen total states that have their own regulations when it comes to local income taxes.
How Do I Do My Own Local Tax Return?
If you’re lucky, your state may have a lookup tool to figure out everything you need to know to file your local tax return.
Continuing with our example regarding Pennsylvania, the state maintains an online database called PA Municipal Statistics that allows taxpayers to type in their address to see their local tax collector and local tax rate.
From there, your local tax collector generally has a website that will allow you to file online (or at least provides you the forms to fill and mail).
Isn’t There a Better Way to File my Local Tax Returns?
Yes, there is! Let Boundless Tax handle them!
With every tax package we offer, our pricing is based on one Federal, one state, and one local tax return. You can rest assured that a licensed, US-based tax expert is looking to see if your state has a local tax and if you need to file a local tax return.
Boundless Tax is a 100% online, 100% done-for-you tax service. Here’s how stress-free your tax filings can be:
Still Have Questions?
Our tax experts are here to help! Feel free to ask questions below in the comments or live chat with a licensed, US-based tax expert now to get answers about your state’s local income tax.