These days, the major tax preparation software companies, like Turbo Tax, TaxHawk and Tax Cut, offer people with simpler federal income taxes a way to file for free. They do this for two reasons. First, and foremost, is that despite the millions of dollars they spend lobbying to keep the IRS itself from providing a free, easy way to file basic income taxes, people are starting to expect such things in the internet age. By getting ahead of the IRS and offering free(ish) tax filing, they can keep a damper on any move to making tax filing without them easier.
The other reason is that most people with very easy taxes probably won’t bother with their software anyway. Filing income taxes isn’t hard when you work a single job and just deduct a couple of kids and a mortgage. But, there are ways to upsell, or otherwise encourage people to buy, or pay for other services like audit defense. The most common upsell is filing your state income taxes.
Colorado State Income Tax
Is it worth paying TurboTax to file state return in Colorado? Probably, not.
While the standard Colorado Individual Income Tax Form 104 (the Colorado version of the 1040), is up to 5 pages this year, none of it is remotely complicated unless you have an unusual situation like mining royalties.
In fact, a closer looks shows that Page 1 is just your personal information (name, address, birthday, Social Security number) and two lines copied directly from your IRS 1040 Form.
Always file your federal income taxes before doing your state income taxes. Almost all states require at least some information from your federal tax forms in order to file your state taxes.
Page 2 is where you actually start “doing your taxes” but even that is pretty straightforward.
If you got a state tax refund, the Feds made you count it as income. (It was reported on a 1099-G) The state doesn’t get to tax that refund, so you subtract it out on line 5. Again, just copy the number directly from your already completed federal tax forms.
Line 6 is only applicable if you have U.S. bonds, bills, or notes.
Line 7 and 8 are only if you have a pension.
Line 9 only counts for specific Colorado type investments. (If you didn’t make those investments on purpose in order to take this deduction, then chance are very good that you don’t have any of these investments “accidentally.”)
Line 10 applies for anyone who made contributions to the Colorado 529 college savings plan. You get to deduct those contributions here.
Line 11 through 18 won’t apply to most Colorado residents. Read the lines and if you think you might qualify, dig into the instructions. Just a note on Line 11, that only is for deductions that you did not already deduct on your federal income taxes, so for most people, that’s just a zero as well.
Line 21 is a copy from your federal return.
Line 22 and 23 only apply if you are retired.
Line 24 only applies if you own Colorado municipal bonds.
Page 3 looks complicated, but line 37 is the only one that won’t be zero for most people, unless you have your own business, in which case your estimated quarterly tax payments go on line 40.
Page 4 is a bit of math and figuring out your TABOR refund this year with the cute little chart at the top.
Lines 50 through 64 are just the ever growing list of organizations you can donate your state refund to.
And Page 5 is where your banking information goes if you want to direct deposit your refund. (Don’t bother to fill it out if you owe.)
File Colorado Income Tax for Free
Of course, this is all moot.
Unlike the heavily lobbied federal government, Colorado offers a free, fast, easy, online tool to file your State of Colorado income taxes for free online. Just finish up your federal return and then go to colorado.gov to file online. This is also the fastest way to get your state tax refund because all the information goes directly into their system without someone having to enter the data from your forms.
If you don’t qualify for the simple state tax return (most full-time residents do) then it will bump you out and have you file differently.
But, for most Colorado residents paying to file your state tax return with TurboTax or Tax Cut is not worth it.