A lot of people today decide to handle their own tax returns as a way to save money. Depending on your line of work and how many income sources you have, this can be straightforward or complex. However, if you are prepared, handling your taxes yourself is something that everyone can do. With that in mind, read on to discover some useful tips on doing your taxes yourself.
Know the deadline – One of the first things you need to do is familiarise yourself with the deadline for your tax return. This will depend on the type of return you are submitting. If you run your own business, you may have a number of different types of taxes to deal with throughout the year. Once you know your deadline, you will be able to plan for your taxes more efficiently. This is not only in terms of making sure you submit it on time and give yourself plenty of time to fill out the documents, but also with regards to putting money away so that you have enough cash to pay your tax bill.
Use software – Technology has advanced rapidly over the years and there seems to be a tool to assist with everything now. This is certainly the case when it comes to doing your tax returns. The power of tax-filing software should never be underestimated. Filing electronically can help you to eliminate mistakes while also giving you the ability to significantly cut down the time it takes you to do your tax return. You can ensure you do not use the wrong forms or fill in the fields incorrectly.
Check and double-check your return – Yes, tax returns are boring. Yes, filling out your tax return was effort enough, and now you have to check over it? Yes, and again! Once you have filled in your tax return, save it, and go back to it at a later date once your mind is refreshed. If you do this, it will be much easier for you to pick up on any mistakes that you have made.
Don’t forget about state taxes – Depending on what state your business is located in, you may have a number of other taxes to contend with. The vast majority of states require a separate tax return to filed. There are only seven states that do not collect income tax at the moment. These states are Wyoming, Washington, Texas, South Dakota, Nevada, Florida, and Alaska.
Dealing with deductions – When it comes to filling in your tax return, one aspect that you need to consider is the deductions you are going to include in the return. One of the elements you need to think about is whether or not you should itemize your deductions. This tends to be advantageous if your deductions are going to be more than the standard deduction. Again, this is where software comes in useful because it will guide you regarding the best approach. You are going to need forms to itemize your business deductions. For example, the 1098 form for mortgage interest. You will also need receipts that showcase all of your expenses, for example, medical costs, unreimbursed employee business expenses, and charitable contributions.
Get all of the required documents and paperwork together – The next step is to make sure you get all of your paperwork together. This includes any forms that have income information on them, especially those from financial institutions and employers. Here is a list of the documents you are going to need, as well as what they are required for:
5498-SA (HSA/MSA contributions)
5498 (IRA contributions)
Income Adjustment Documents, for example, Form 1098-E (student loan interest)
1099-C (forgiven debt)
1099-G (state tax returns and unemployment benefits)
SSA-1099 (Social Security benefits)
K-1 (MLP, Partnership or S-Corp share of income
1099-R (retirement distributions)
1099-MISC (independent contractor work, royalties)
Combined 1099 (brokerage combined tax statement)
1099-B (investment sales)
W-2G (gambling winnings)
Form W-2 (wages)
Take a look at your tax return from last year – If you have already had a tax return filed before by your accountant in the past, you will be able to gain access to this. It is a good idea to take a look at it because it will make your current year’s tax return filling much more straightforward. A lot of the information will be the same, including your employer federal ID numbers, for example.
So there you have it: some useful tips that will help you to handle your taxes yourself so that you do not need to pay an accountant. Nevertheless, if you are worried that you have made a mistake, or your income is simply too complicated, don’t overlook the prospect of paying a professional to do your tax return for you. The last thing you want is to get stung with a fine because you made an error.