5 Steps on what needs to be done with your Own Taxes
There is no grand celebration or a merit badge you can earn when doing your own taxes or sending your e-filed return. However, preparing your own taxes does build confidence and knowledge that can open the door to better financial decision making throughout the year.
You may also save yourself from hiring a professional tax preparer. But once your taxes become so complex, they are better be left to the experts.
Step 1: Gather Your Thoughts (and Your Paperwork)
If you fall in the single-and-simple category, it's just easy. But once you have property, children, investments and multiple income sources, tax filing gets tricky. Start by taking into account any relevant life events from the past year. Did you:
- Get married or divorced?
- Have a baby?
- Buy or sell a home?
- Start a 401(k) or other retirement account?
- Collect Social Security benefits?
- Make an early withdrawal from a retirement fund?
Now, gather up your documents:
- A copy of last year's tax return
- W-2s and 1099s (and other documents showing income)
- Interest statements (mortgage, student loan)
- Records of contributions made to health savings and retirement accounts
- Any receipts or bank statements that you will use to support deductions
What if you didn't receive a tax document that you need to file?
If you didn't receive your W-2 or other income documents by January 31, the internal revenue service (IRS) offers tips on what needs to be done.
Log in to the secure online site if you need interest information from your bank or a lending institution such as a student loan provider. For secure download, PDF versions of tax documents are often posted by financial institutions.
You should contact directly the company or organization to check on the status if you haven't receive a tax document in the mail by January 31. This is always the best rule of thumb.
Step 2: Do Your Homework
When you have a lot of knowledge, the more entitled you will be to handle your taxes year after year and find ways to boost your tax refund or adjust your withholdingto spread that money evenly throughout the year.
First, study tax credits and deductions such as earned income tax credits, education credits and charitable contribution deductions to see what you qualify for. Second, determine which federal tax forms you will need.
Some of the most common formsinclude:
- Form 1040 - Used by most U.S. citizens and residents.
- Schedule A - Used for calculating itemized deductions.
- Form 1040-ES - Used for calculating and paying estimated tax on income that isn't subject to withholding (such as self-employment pay and alimony).
- Form 1040 EZ - Used for the simplest filings that have no itemized deductions, adjustment claims or tax credits (with the exception of the earned income tax credit).
Step 3: Check-out your Tax-Filing Options
Once you have a better knowledge on how to handle your own taxes, take a deep breath and know that you are not alone. If you just know where to look, there's a lot of free tax help you can find.
Free Tax Return Preparation
Individual who qualify can have free tax help from IRS.
Volunteers lend a hand from January to April through two programs:
- Volunteer Income Tax Assistance (VITA) Program - Available to those who make less than $55,000.
- Tax Counseling for the Elderly (TCE) Program - Available to all, with priority given to those 60 years and older. These IRS-certified volunteers specialize in pension- and retirement-related tax issues.
Free File Software
Electronic tax-filing software can spare you some confusion and frustration. Plus, with theÂ IRS Free File program, you save the expense of paying professionals who use similar software anyway. You can use this option to get free tax help, but you'll want to use the Free File tools as the software available to you will depend on your income and state of residence.
Paid Tax-Filing Software
Commercial tax software companies usually offers:
- live support
- easy-to-follow questions
- planning calculators
- error checks - and more.
You'll want to look around for softwares that best meet your needs and it also depends on how complex your return is. There are some programs that offer a range of filing services such as TaxACT, TurboTax, or eSmart Tax.
Step 4: Receive the Rewards
Filing your own tax is a big achievement whether you owe the IRS or looking forward for a tax refund. It enhances your knowledge that makes it easier year after year. Just always see to it that you handle your payments immediately if you owe, whether you can pay in full or not when you file.
Your options include:
- Paying by debit or credit card, electronic funds transfer or by check or money order.
- Entering an installment agreement to pay your taxes over an extended period.
- Entering an offer in compromise that allows for a lower settlement.
Step 5: Get Ready for Next Year
Get ready for the next year's tax season and take what you've learned this go 'round. You will have a chance to dig a little deeper into tax topics you didn't have time to tackle this year. Maybe you could have used some record keeping tips to make the process smoother? Or maybe you're unaware that you need to make quarterly estimated tax payments? Whatever situation you are in right now, working on your own taxes is a superb achievement. So, go ahead. Throw yourself a tax-time party once your return is filed. You deserve it.
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