File this year’s return for free or for a fee

There are many ways to file your annual income tax return -- more than ever this year, in fact. But virtually all of them have a cost or catch. The best way for you to file is going to depend on your income, the complexity of your situation and how good you are at following directions. Your options:

IRS Free File

If you earn less than $56,000 annually, the Internal Revenue Service offers a free electronic filing service through the Free File Alliance -- a cooperative of roughly two dozen tax software firms including H&R; Block, TurboTax maker Intuit Inc. and TaxSlayer.com. To participate, go to the IRS website at www.irs.gov and click on “Free File.” The prompt will ask whether you want to pick a provider on your own or have the IRS help you. There are roughly 19 offerings, but not all are available to everyone. Some of the Free File partners also restrict their services by age, state or income. The “Help” prompt takes you to a brief questionnaire that narrows the field to companies that will accept your return.

The one caution: The service provides free federal filing, but most people will also need to file a state income tax return. Most of the free-file companies will charge $20 to $30 to file your state return. You save time by buying state tax filing from the company that you did your federal return because the programs typically import your federal information into the state return. But you might want to ask about the cost before you start. Many states including California offer free electronic filing, so you do have other options.

More free services

TurboTax and H&R; Block offer free filing services that are separate from the income-restricted IRS program. However, the services are limited to those with simple returns -- those with wages, not self-employment or partnership income or complex investments, for example. And, like the program run through the IRS, this one will import your state tax information and file state returns, but not free. State filing costs $25 to $30.

In addition, for the first time, the IRS is offering an electronic filing option for higher-end taxpayers. This doesn’t give you free software, but it gives access to free online tax forms, which you can fill out electronically and have the computer do the math. To get to it, click “Free File,” but scroll past the prompts asking whether you want to pick a provider on your own or have the IRS help you, and click on “Choose Fillable Forms.”

Free and in person

If you need tax help but you’re not technologically savvy -- nor in possession of a computer -- there are other options if you are low-income, elderly or a member of the military. Specifically:

* Low income: The IRS sponsors Volunteer Income Tax Assistance programs, where trained community volunteers -- often retired accountants or students -- prepare returns for lower-income filers. To qualify, you must earn $42,000 or less.

* Seniors: If you are 60 or over, there’s a program, largely staffed by AARP volunteers, called Tax Counseling for the Elderly.

* Military: The Armed Forces Tax Council oversees a worldwide tax-help program for members of the military and their families.

If you fit into any of these categories, call (800) 906-9887 to find a local site. If you are a senior, you can call AARP at (888) 227-7669.

Software solution

If you want to file both federal and state returns electronically, it will cost $50 to $60 to buy a decent software program. TurboTax ( www.turbotax.intuit.com) and H&R; Block’s Tax Cut ( www.taxcut.com) both prompt users with interviews that automatically fill out the appropriate forms. If you want to look at the forms, that’s possible too.

And, because I’m not the only one who gets confused by what they’re asking or how to handle a particular issue, both offer some sort of support, either online or over the phone. Tax Cut includes one free phone call; Turbo Tax has an online “community” that offers Web-based support. If you need more help, it’ll allow you to spend more phone time with a professional, but for an additional fee.

Those with complex tax situations -- such as small-business owners -- might want to upgrade to the more expensive software, which runs $80 to $100 because it has more detailed information on the most commonly asked questions for business owners, such as information on writing off car expenses and dealing with depreciation.

Prepared by a pro

If you don’t qualify for the free services, but want or need more help than software can provide, it may be best to seek help from a pro. There are essentially three choices:

If you go to a storefront preparer (H&R; Block or Liberty Tax, for example), you are likely to pay $100 to $250, depending on the number of forms your return requires.

If you go to an enrolled agent -- tax specialists who have earned a special blessing from the IRS -- you’re likely to pay $200 to $500. Hire a certified public accountant, which is the next step up, and you’re talking $400 to $1,500, depending on the firm, the complexity of your return and your level of organization.

When is it worth spending the extra money? The answer is a personal one. For me, there were multiple tipping points: I have freelance and royalty income and must prepare a Schedule C (Form 1040), Profit or Loss from Business. I am among the millions of filers who consistently flirt with the truly awful alternative minimum tax, which I fail to fully understand even after 20 years of writing about federal income taxes. And, most important, I wanted advice.

As good as the software programs may be, they can’t tell you the best way to trigger capital losses (come on, we all have them by now) to reduce the tax consequences of future gains (I’m an optimist). Nor can the software explain the tax implications of home offices or how changing tax rules might affect the amount you have to pay if you sold your residence. Upper-middle-income families with children in college might also want advice about what it takes to qualify for one or more of the lucrative education tax breaks.

And then there’s the lazy factor. Hiring out saves me time, so I justify the expense just like I justify spending money on a gardener. I’m pretty sure that I’ll earn more spending the hours doing my job than I’d save by doing theirs.

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kathykristof24@gmail.com

Kathy Kristof is a personal-finance author and syndicated columnist.