It's possible that filing taxes won't be your favorite part of the year. However, it is critical to ensure that they are submitted on time. At a first glance, taking on this project yourself may appear to be a mammoth task that is impossible to complete. Here is the good news: this need not be the case! When you have a basic understanding of handling your taxes, the process will appear to be much more doable for you.
Therefore, that is exactly what we will focus on today: how to do your taxes!
Why should you handle your taxes instead of hiring a professional?
Before we go into the specifics of preparing your taxes, let's first talk about the advantages. When you begin to get a handle on your finances, preparing your taxes may appear like the next logical step.
You are devoting some of your time to increasing your financial savvy, paying off any outstanding debt, or building up your savings. This portion of your road toward better personal finance will probably be more challenging for you than submitting your taxes.
Tax time should not be stressful because you can handle other aspects of your money efficiently, and you are more in tune with your overall financial picture.
Filing your taxes can benefit your bank account and give you a sense of more control over your financial situation. You might be able to file for yourself free of charge in specific circumstances.
Even if you cannot utilize a free service to do your taxes, you will discover that the expenses of utilizing software to do your taxes are far lower than the expenses involved with hiring a professional to do your taxes for you.
What you need to do for your taxes
If you are going to do your taxes, you will need to gather all of the paperwork and information essential to filing taxes before getting started. It is highly recommended that you compile all of your information in one easily accessible location.
By gathering this information before beginning to file your taxes, you will be able to save a significant amount of time yourself. You won't have to take breaks every few minutes to look for another document because you'll have everything you need.
Before you begin, you will need the following things to get going:
1. Compile all of your necessary documents
The filing of your taxes will go much more smoothly if you have all of the relevant documentation gathered beforehand. It is possible that you will not be able to complete the process in its entirety if you do not have the papers necessary. Spend a few minutes ahead of time gathering everything required of you. The following is a list of what you may require:
You will want a W-2 form from every employer you have worked for. The vast majority of the time, your employer will give you this paperwork without your having to ask for it. On the other hand, if you do not have your W-2, you should contact the Human Resources department at your company.
If you operate a side business or bring in money in any capacity acting as an independent contractor, you are required to obtain 1099. Every customer you worked for throughout the year is obligated to provide you a Form 1099 that details how much money they paid you.
If you are the house owner and have paid any interest on your mortgage during the year, you must record this information. This only applies if the total interest you've already paid is greater than $600. To submit this expense, you will need to use form 1098.
Deductible expense receipts
If you manage your own company, you might be able to deduct part of your business expenses from the revenue that your company brings in. It is essential to keep an accurate record of these receipts for reasons related to taxes.
It would be best to have all of this information ready to file your taxes properly. It's the very minimum. Despite this, the list does not contain every form you might have a requirement for. Take into account the specifics of your income situation to figure out what other information you'll need to include in the papers you fill out.
2. Determine your filing status
Your ability to correctly determine your filing status is one of the most important aspects of your tax preparation. Your overall tax burden may be dramatically different from one person to the next, depending on how you file your taxes. Finding out your filing status shouldn't give you any problems at all.
There are just five distinct ways that one can file their taxes.
You will go with this option if you don't already have a spouse. You are also eligible to apply for this status if you have already been divorced or have been legally separated.
ii. Married (filing jointly)
You and your spouse have the option to file your taxes jointly. On the other hand, your wedding date must have fallen on or before the 31st of December of the taxable year. If you did not get married until much later, you will not be able to submit your taxes as a married couple on the form for that year.
iii. Married (filing separately)
There is the option for you to file your taxes independently from your spouse. However, in some circumstances, this could result in a larger total tax liability calculated at a higher tax rate. You can assess whether or not this is a good alternative for your household by preparing your taxes in both ways and comparing the results.
iv. Head of household
If you are not married but keep a home for yourself and there is at least one other person who depends on you, this category is suitable for you. Your situation does call for some unique considerations to be taken into account.
v. Widow or Widower with dependents
This is the file status that occurs the least frequently. You can be eligible for this status if your spouse passes away during the year, leaving you and one or more dependent children behind after their passing.
Please take a moment to determine your filing status per the standards provided by the IRS. It should not be very tedious to determine which status you are eligible to claim in most situations.
3. Do some research on possible tax deductions
If you intend to file your taxes, you should ensure that you understand the deductions and credits to which you are entitled. You do not want to make the mistake of overpaying the Internal Revenue Service (IRS) because you were not aware that you were qualified for a credit or deduction.
Childcare expenses, charitable contributions, and credit for higher education are a few examples of frequent tax deductions and credits that taxpayers should watch. Ensure that you remember to include all of these in your tax return.
How to file one's own personal taxes
After getting together all of the necessary documents and selecting how you will be doing your taxes, you are ready to complete your taxes. There are three distinct approaches that you might take to accomplish this goal. There is a minor difference in how one can prepare for each of these choices, but fundamentally, they are all the same. Pick the alternative that corresponds most closely to how you live your life.
1. File your taxes manually
On the Internal Revenue Service (IRS) website, you will find the paperwork that you will need to fill out. The downloading of these forms is without cost. If you decide to print them off, you can fill them out by hand and send them in through the mail.
This manual technique of doing your taxes is only a good alternative for you to consider in most circumstances if your tax situation is quite straightforward. Although you can work through a more detailed financial picture with these paper forms, the process may get tedious after a few forms.
2. Use the online fillable forms provided by the IRS to file your taxes
On their e-File website, the Internal Revenue Service (IRS) provides free file fillable forms. To assist you in filling out the fillable forms, the IRS will provide you with instructions that go line by line. If you have never done your taxes before, it is highly recommended that you carefully read and follow all directions.
3. File your taxes using online tools that are available to you
When it comes to doing your taxes, the last choice you have is to use one of the many online tax software tools. If you have a complicated financial position regarding taxes, it may be worthwhile to pay to utilize an online software program even if you may be required to do so.
The majority of tax software packages will guide you through filing by providing prompts at various points along the road. Having a look at these questions can be of assistance. You could come across something that brings to attention the details of your tax year that are easy to overlook.
Some examples of good choices are as follows:
Credit Karma Tax
In addition to providing free credit monitoring, Credit Karma also provides free tax filing through a user interface that is intuitive and uncomplicated.
Free filing of your basic tax return is possible with the usage of TurboTax. On the other hand, if your circumstance is particularly complex, you might be required to upgrade to a paid version.
The H&R Block
Another well-known piece of tax software that can assist you in filing your forms for free and at the very minimum is H&R Block. If you require additional assistance, though, their paid alternatives are fairly reasonably priced.
Go with the piece of software that provides you with the most sense of ease. If you choose a way that you are comfortable with, completing your taxes will be simpler for you.
In order to do my taxes, which filing option should I select?
You can submit your tax return via any of these methods without any problems. There is not just one universal alternative that is preferable to everyone. Your individual choices ought to be the deciding factor in this matter.
For instance, if you find that working with a pen and paper makes you feel more at ease, you can try working by hand. On the other hand, if you are skilled at using your computer, the online tax preparation software can be more suitable.
You will be able to file your taxes regardless of the outcome. In addition, you will find out whether or not you have tax debt that you owe to the government or whether or not you are eligible for a tax refund. If you need to make a payment to the IRS for your taxes, you can send a check to them in the mail instead.
Nevertheless, you can also execute this transaction using a wire transfer, credit card, or debit card. The online payment system offered by the IRS is where you may get more information about these many possibilities.
Should I file my taxes on my own?
Even though you are familiar with the process, you may still be asking yourself, "Should I do my taxes?" Not everyone is cut out to tackle their finances and pay their taxes. Let's take a more in-depth look at it to determine whether or not it would be beneficial to you.
When would it be favorable for me to file my own taxes?
You can handle this annual responsibility on your own, even though doing your taxes can take a lot of time and feel like a chore. You may be able to cut costs, but more importantly, you'll have a better sense of mastery over your financial situation.
If you decide to do your taxes, you will need to pay close attention to the specifics at each step of the process. You should set aside some time to complete your documents because doing so is likely to take many hours.
When is it necessary to get the assistance of a professional?
You should look into hiring a professional if you don't have the time to dedicate to doing this task independently. If your tax situation is particularly intricate, you should also consider hiring an expert.
If you have a complicated situation with several W-2s, 1099s, and your side hustle, you should probably seek the advice of an expert. They can provide you with the assistance to clarify your filing and ensure that you do not miss out on any potential savings.
When handling your taxes, you should get ready in advance
You should be able to handle your taxes now, right? If you intend to do your taxes this year, you must take the necessary steps. To be on the safe side, you should get started as soon as possible.
Additionally, you can simplify the procedure by storing your essential documents in one location. Get this task off of your financial to-do list as soon as possible to concentrate on your other financial objectives.