How To File Your Taxes
The opinions expressed in this editorial are derived from personal research and should not be construed as expert financial advice.
Feeling stressed about how to file your taxes? You’re not alone. A NerdWallet survey, found that taxpayers ages 18-34 report the highest stress of any age group about taxes. But, with less than 30 days until the deadline, procrastinate any longer and you may find yourself having to pay the tax day equivalent of Uber’s infamous New Year’s Eve surge pricing.
Ok, so let’s do this. Brew some coffee, sit in your favorite comfy chair and remind yourself that for nearly 8 out of 10 taxpayers there’s a refund waiting at the end of this unpleasant task.
Should You File Your Own Taxes?
Our legal team wants me to remind you that I’m not a tax expert. So consider this a tax chitchat with a well-informed friend.
1. Is most of your income from a salary?
2. Do you have less than $6,300 in itemized deductions ($12,600 if you’re married and $9,250 if you’re the head of household)?
If the answer is yes to both of those questions, going the DIY route is fairly simple. Your employer will provide you with a W-2 form, which shows the amount of taxes that have already been withheld from your paycheck. As for deductions, Uncle Sam already gives you a fairly sizeable refund through the standard deduction. Unless you can itemize more than the amounts listed above, you’ll save time skipping the extra paperwork and reducing your risk of being audited.
How To File Your Own Taxes
There are a lot of online tools to help you file. Here are some free and low-cost tools that may suit your needs.
- TurboTax Absolute Zero: If you only need to file 1040A or 1040EZ
- TaxAct Express: File from your phone.
- Free File: If you make less than $62,000 per year.
- TaxSlayer: If you have a more complicated situation (e.g., you’re self-employed, or you have income from stocks or a rental property).
When Should You Itemize Your Deductions?
If you answer yes to either of these questions, you may want to itemize your deductions.
1. Do you own a home?
2. Do you have a high salary and live in a state with high-income taxes?
As Lisa Greene-Lewis, a CPA and tax expert with tax-preparation software provider TurboTax told USA Today, “Generally, if you own a home, you should itemize because mortgage interest and local property taxes are both deductible on your federal return.” For some, that single deduction puts them over the standard deduction amount.
Another deduction that may put you over the edge, is the amount you pay in state and local taxes. If you have a high salary and live in a state with high taxes (we’re talking to you, Californians), you can deduct your state taxes from your federal filing.
These are the two biggest deductions. If they apply to you, do some quick mental math to see if they put you close to the standard deduction threshold. If so, it’s time to whip out those receipts to make sure you get your full refund for any and all qualified tax write-offs.
What Can You Deduct?
What and how much you can deduct is where this tax stuff starts to get complicated. In general, expenses related to the following are deductible:
- Moving costs (for long distance)
- Health insurance premiums
- Interest on student loans
- Tuition and education fees
- Charitable giving
- IRA contributions (take advantage of the Saver’s Credit if you can!)
- Buying or selling a home
- Unreimbursed employment-related expenses
- Property taxes
- Child care
How To Hire Someone To Do Your Taxes
If you’re self-employed, plan to itemize or have complicated questions, you may want to let someone else handle your taxes. But before you hand over your financial fate, make sure to do a bit of research. Did you know that your barber works in a more regulated profession than a tax professional? Seriously, only 4 states require testing and continuing education for tax preparers. Here are some questions to consider asking:
- Could you confirm your Preparer Tax Identification Number (PTIN) and certification?
- Do you have any tax specific training and credentials?
- What types of tax returns do you typically handle?
- How do you determine how much to charge?
- How do you handle audits?
- Will you be signing my return as my preparer?
What Documents Do You Need?
- Last year’s tax returns: e.g., Form 1040
- Wage statements: W-2 and 1099 forms
- Interest and dividend income: 1099 form(s)
- Additional income: K-1, Social Security, unemployment, etc.
- Wins or losses: reports of any realized financial gains or losses
Now, how are you going to spend that refund? Share with us on twitter #MyTaxReFUNd