Filing income tax returns may seem to be a daunting task. But it doesn’t need to be so when you understand the basics.
When you file your income tax returns on your own, you’ll feel that the whole process is much more manageable. In this post, we will discuss how you can file your income tax returns yourself.
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#1. How to file your income tax returns yourself
There are various ways to file income tax returns on your own. Each way is different from the other, and there are lots of preparations involved in it.
You have to arrange all the necessary documents and decide your filing status before preparing your income tax returns. We will get to that later.
Let us discuss the various ways to file tax returns first.
1.1. Mail Your Income Tax Returns
You can get the requisite tax forms from the IRS website. Download those forms for free and then take a print out. Read the forms carefully and fill out them with a pen. Once you complete the forms, you can mail them to the IRS.
When should you go this way?
It’s best to file your tax returns manually when you have an uncomplicated tax situation. It isn’t that you can’t fill out forms manually when you have a complex tax situation.
But in that case, you have to be more careful at the time of crunching numbers and filling out the forms. The entire filing process may become too exhausting after some time.
1.2. File tax returns online
Go to the IRS Free File page on their official website. You’ll get online fill-able tax return forms from here. Read the instructions given for each question before filling out the form. Don’t worry if you’re filing income tax returns for the first time. The detailed instructions will fill out the form accurately.
1.3. Use tax software
Using a good tax software program is another way of filing your tax returns yourself. There are free tax software programs that you can use to file your tax. But check the reviews first since you can’t have a casual approach here. The IRS may heavily penalize you for one small mistake.
Usually, tax software programs have a user-friendly interface to guide you about the filing process. They help you to notice even the smallest detail that you may overlook while filing your tax returns.
Some of the most popular tax software programs are Credit Karma Tax, Turbo Tax, and H&R Block. They have both the free version and the premium version. The free version comes handy when you have a simple tax scenario.
However, if you have a complicated case, then it’s better to go for a paid version.
1.4 Which one is the best option for you?
All the aforementioned options are a good way to file your tax returns. All the options are equally good. Now, it’s up to you. If you’re not tech-savvy, then sending your tax documents via mail is a feasible option for you.
If you’re good at working on a computer, then you can submit your tax returns online through the IRS e-file option or the tax software programs.
All the aforementioned options will let you know how much you need to pay the government or how much you can expect to get back from the IRS.
You can make payments in all the 3 options. You can send a check via mail or you can make payments via debit cards. And, if you don’t have enough money to pay tax, then you can file bankruptcy.
But you should choose this option only when you have a federal income tax debt in your kitty. Don’t even dare to file bankruptcy if you have payroll tax or fraud penalties.
Steps you must take before filing your income tax returns
Before you file your income tax return, you need to take a few steps beforehand. You have to collect all the documents and information before beginning the tax filing process.
Let’s find out what steps you need to take before filing your tax returns.
2.1. Collect and arrange all your documents
This is the most vital step you have to take before filing tax returns. You need plenty of documents and forms to finish the entire process. For instance, W-2s, 1098 form, 1099s, deductible expense receipts, etc.
If you’re a salaried person, then your employer is most likely to give you the W-2 form upon request. You can also request the HR manager to give you the W-2 form for tax filing purposes. They should give you without making any fuss.
Do you earn money through a part-time job or a side gig? If so, you need to report that income to the IRS. Ask your clients to send you the 1099 form as soon as possible. When you receive the form, check it thoroughly and confirm if the amount you received from the client is mentioned there.
Have you settled debt recently and saved a big amount of money?
If so, then you have to collect 1099-C from creditors and pay tax for debt forgiveness.
Have you bought a home with a mortgage?
In that case, you must be paying interest on the loan. If the total amount you have paid on the interest is more than $600, then you need a 1098 form.
Are you an entrepreneur?
If so, then you can qualify for tax deductions for eligible business expenditures. Keep all the receipts of your business expenses. Maintain a record of all the bills for tax purposes.
2.2. Decide your status quo
Much of your taxable amount depends on your tax filing status. You have to decide the status when making your tax preparations.
Choose ‘single filing’ status when you’re not married or when you’re a divorcee.
Choose ‘married filing jointly’ status when you’re married and want to file tax returns with your spouse. Make sure you choose this option when you have got married before December 31 of a financial year.
Choose ‘married filing separately’ status when you don’t want to file tax returns with your spouse. If you choose this option, you may have to pay a high tax rate. Discuss with your spouse before making the final decision regarding the filing status.
Choose ‘head of the household’ filing status when you’re legally not married, have a house in your name, and have a dependent. Read all the rules and regulations to confirm if you qualify for this.
Choose ‘widow’ filing status when your spouse has passed away during the financial year with a dependent child.
2.3. Calculate your tax deductions
Read the available tax deductions in a financial year minutely. Find out what tax exemptions you’re eligible for. Read the clauses of the deductions before making a claim. Make sure you don’t miss out on a single deduction that you’re eligible for.
The most common tax deductions include charitable donations and medical expenses. If you have made charitable contributions or had qualified medical expenditures, then you can qualify for it.
The standard tax deduction as per your tax filing status is given below:
- Single – $12,400
- Married filing jointly – $24,800
- Married filing separately – $1,2400
- House of the household – $18,650
2.4. Know your Social Security Number
This number is vital when you’re filing tax returns. Not only do you need to know your SSN but also you have to know your spouse’s and child’s numbers. Note down the numbers accurately especially when you’re choosing the ‘married filing jointly’ status.
2.5 When should you file a tax return on your own?
Filing income tax returns on your own is not a good option for everyone. Let’s accept the fact. Filing income tax returns is quite a time-consuming process. Plus, the entire filing process is quite complex.
It’s true that filing your tax returns on your own will help to save money and time. But you also need to understand the tax laws, be good at crunching numbers, complete all the forms, and submit them within the deadline.
You can’t even skip even a minute detail here. It may take many hours to fill out your tax forms. So, you have to be patient and careful at the same time. There is no scope for making a mistake here.
If you don’t have the time and tenacity to do your tax, then it’s better to consult a tax accountant. An experienced accountant can help you to navigate a complicated tax situation with several 1099s and W-2s. He knows how to file tax returns to ensure that you have maximum savings.
Since you’re managing your money, filing your income tax returns on your own makes sense. Be it paying off debt or building savings, you’re doing everything on your own.
That part of managing money is more difficult than other things. So if you can manage that, then you can file your income tax returns also. It shouldn’t be too tough.