Do you know how to file your taxes?
Filing your own taxes can save you money in the long run. But if you haven’t done it before, you might not know where to start.
Don’t worry, we’re here to help! Read on for 5 tips for how to do your own taxes.
1. Gather All the Materials You Need
First you want to get all the information, documentation and materials you’ll need. This is crucial to a smooth filing process.
Without access to the paperwork you need, you might not be able to complete the process. Or be scrambling around in a panic to find the information.
You need a W-2 from each of your employers. Most of the time, you’ll get given this without having to ask. But if you don’t have it, chase up your HR department. It’s a minimal fuss, quick process.
If you’re a home owner, report any interest you paid on your mortgage over the tax year. This will only apply if the interest amounts to over $600. You need to use the 1098 form to report this.
If you’re running your own business you might be able to deduct some of your business expenses. Keep all your receipts as a maintained record to make sure you claim what you’re entitled to.
Organization is key here to a smoother, quicker process. If you keep a record of your files and finances all year round, this will help prevent taxes becoming a chore.
2. Work Out Your Filing Status
Another crucial part of preparing to file your taxes is working out your filing status. Having the right status can made a difference to your tax burden in a big way.
Don’t worry though, it’s not as scary as it sounds. There are only 5 filing options to choose from:
If you’re not married, you need to choose this option. If you have divorced, or class as a legal separation you can file this too.
Married Filing Jointly
You can file your taxes with your spouse if you want. But the marriage my have been before or on 31st December of that tax year. If it’s later, you can’t file together until the next year.
Married Filing Separately
You can choose to file separate from your spouse. This can lead, in some cases, to larger amounts of tax owed at higher rates. You can set up your taxes both ways to see which will be the best option for you.
Head of Household
If you are not married but run a home for you and at least 1 dependant you can qualify for this. But there are some rules in regards to your situation so it’s best to research if you think you might qualify.
Widow or Widower with Dependants
This is the least common filing status. If you lose a spouse during the year and you have at least 1 dependant, this might be the option for you.
Take a while to work out your filing status, and check IRS guidelines if you’re not sure. For most cases, it’ll be easy to see which one fits your circumstances.
3. Work Out What You’re Entitled to
Work out what credits and deductions may apply to you. It will help you with step one of getting the right documents together. Here are some you may consider:
You might have a regular donation set up to your favourite charity, or you’ve done a few one off payments. Keep a record, as you can often deduct this if you itemize your taxes.
Student Loan Interest
You can deduct $2,500 or up to this in interest payments. The amount depends on your modified, gross income.
If you think you might qualify for anything, make sure you check out the IRS website for guidance. It will guide you on requirements and how to apply.
4. Be Mindful of Deadlines
If your documents arrive in January or February, you’ve got about 2 months to prepare. The usual return date will be April 15. So plan a date where you’ll sit down and start your return.
Make sure this date is early enough so that if you need 1 or 2 more sessions, you have time. Don’t force it in a single sitting. If you’ve got your documents ready, and you’ve planned ahead of time you can take it slow and be thorough.
As a general rule, it’s better to fill your return in earlier not later. The earlier you file, the more chance you have of avoiding tax related identity theft too. This is a crime that’s getting more common. Plus any owed refunds arrive quicker.
5. Decide How You’ll Do It
You can submit your tax returns in 1 of 3 ways. So choose the one that best suits your needs and abilities:
By Hand or Online
Download the forms from the IRS website and print them out. It’s free to get them, you only pay the postage you need. Fill them in by hand, and post them off to the given address, it’s easy. Alternatively, you can fill in the same forms online on their e-site.
If you have a simple tax situation, this manual method is often the best way to go. If you have a more complex situation, it can be a bit tedious after a while.
With Online Tax Software
You can use an online tax software program to file. You might need to pay for this software, but for complex situations it’ll be much easier.
Most tax software walks you through the process, with prompts as you go through it. Again, this is helpful if you have a complicated tax set up. However, you may run into difficulties if you need to know how to reduce tax debt to irs, as software has its limitations.
How to Do Your Own Taxes The Easy Way
So there you have it! With these 5 tips, you’ll be a step ahead when it comes to knowing how to do your own taxes.
Preparation and staying organized are key here. Do you research, work out your filing status, deductibles and have all your info to hand. Give yourself plenty of time to sit down and fill it out, to avoid a scramble at the end.
If you found this article useful, be sure to check out our other blog posts.