There are several good reasons to consider filing your own tax return. It can be cheaper than putting everything in the hands of a professional. You’ll learn how to lower your tax bill and you’ll be able to crunch the numbers in the comfort of your own home. If you’d prefer a DIY approach at tax time, taking the following steps can make the process go more smoothly.
If you prefer a hands-on approach, a financial advisor can help optimize your financial plan to lower your tax liability.
1. Find Out Which Forms You Need to File
The first step to doing your own taxes is figuring out which paperwork you’ll need to complete. If you’re a regular employee, you have the option of filing the long 1040 income tax return form or the short 1040A form.
If you’re single or you’re a married couple filing jointly, you can fill out the super short 1040EZ form as long as you have zero dependents, you’re under the age of 65 and your taxable income falls under $100,000.
Self-employed people and others who pay estimated taxes will need to submit tax form 1040-ES. Additional forms that you need will depend on whether you’re itemizing your deductions (Schedule A) or listing capital gains and losses (Schedule D), for example. There are also forms you can fill out to account for tax breaks, special circumstances like thefts and other earnings, like gambling winnings.
2. Choose the Right Tax Software
Looking at the tax forms you’ll be required to submit will give you a sense of how difficult tax filing will be. From there, you can pick the tax software (like TurboTax or H&R Block) that will best meet your needs.
If you don’t mind waiting a while to get your tax refund, you can send paper forms to the IRS through the mail. Otherwise, you can look into using one of the online tax programs. There are quite a few to choose from. Some are entirely free while others have some free features but charge fees for everything else.
Don’t have time to compare and contrast tax software? You can settle for the IRS Free File Software. It allows you to file your federal income tax return (and possibly your state tax return) free of charge.
3. Get Organized
Before you get started on your tax forms, it’s a good idea to collect everything you’ll need during the process. That includes documents like your W-2 form, old tax returns, your dependents’ social security numbers and credit card statements if you’re a business owner. If you plan to claim any deductions, you’ll need bank statements and receipts as proof that you’re eligible for those tax breaks.
4. Get Familiar With Tax Terms and Rules
For anyone filing a tax return for the very first time, it might be wise to familiarize yourself with some of the language you’ll see on tax forms. Doing your own taxes will already take up a big chunk of your time. But filling out all the paperwork could take a lot longer if you don’t know what an exemption is or you don’t understand the difference between credits and deductions.
It’s also important to read up on the tax laws that could affect you. You don’t want to run the risk of getting audited by the IRS because you claimed an expired tax credit or you tried to get an extra deduction by over-contributing to a retirement account.
5. Figure out Which Tax Breaks You Qualify for
Speaking of tax credits and tax deductions, you’ll need to find out which ones you’re allowed to claim. The IRS has an updated list of available tax breaks. You might be able to get a tax credit for your childcare expenses or a deduction for giving to charity.
Additionally, you’ll need to decide whether to itemize your deductions or take the standard deduction. Claiming the standard deduction is the easiest thing to do. Listing all of your deductions and adding them up, however, might be a better way to reduce your tax burden, particularly if you have a high income.
6. Review Before You File
Once you start working on your tax forms, you’ll need to follow the instructions on your paper forms or pay close attention as your online tax software walks you through everything. Even if you’re confident that you did your math right, it’s best to give each form a second look in case you made a mistake.
Related Article: Tax Filing: DIY or Hire a Professional?
7. Seek Assistance When Necessary
Even if you’re working on your tax returns and forms at home, you can run the numbers by a tax professional later on. There are community-based tax assistance centers you can go to for help. Plus, the IRS offers an Interactive Tax Assistant that can answer any questions you might have.
Doing your taxes at home can save you money and give you more insight into your own financial situation. If you adequately prepare yourself, you might find that filing taxes isn’t as dreadful as everyone says it is.
Tips to File Taxes
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