Learning how to do your taxes can be daunting, but it’s an important responsibility if you earn income — and luckily, there are lots of ways to position yourself to save money. Below we’ll look at how to stay on top of your finances and do your taxes in four steps.
Step 1: Figure Out Whether You Need to File
Not everyone needs to file a tax return. It’s important to determine if you’re required to do so to avoid having to pay any penalties or fees, and here are some tips to help you determine if you need to file taxes.
Know the Tax Filing Threshold
The Internal Revenue Service (IRS) sets a minimum income level at which you need to file a tax return, and it changes depending on your filing status, age, and other factors.
Even if you make less than the minimum level, you may still need to file a tax return if you meet certain other criteria. An example is if you had a self-employment income of $400 or more — that would require you to file a tax return. Other factors that may require you to file a tax return include receiving Social Security benefits, having certain types of investment income, or owing certain types of taxes.
If you’re still not sure whether you need to file a tax return, the IRS offers an interactive tool on their website called the “Do I Need to File a Tax Return?” tool.
The Benefits of Filing Even if You’re Not Required
You may still choose to file a tax return for several reasons, even if it’s not required. If you had federal income tax withheld from your paycheck or you made estimated tax payments throughout the year, you may be entitled to a refund, and filing a tax return is the only way to claim it.
Additionally, if you’re eligible for certain tax credits or deductions, filing a tax return can help you take advantage of those benefits.
Stay Up to Date
Finally, it’s important to keep in mind that the rules and regulations of filing taxes can change from year to year. It’s always a good idea to stay informed about the latest tax laws and regulations to ensure that you’re meeting your tax obligations. The IRS website is a great resource for information on filing taxes, and you can also consult with a tax professional for guidance.
Step 2: Choose Whether to File Yourself or Hire a Professional To Do Your Taxes
Once you’ve figured out your tax bracket and eligibility, it’s time to act. Some people may feel comfortable filing taxes themselves, and others will prefer to hire a tax preparer. Here are the pros and cons of each approach.
Do Your Own Taxes
One of the main advantages of filing taxes yourself is that it can be less expensive than hiring a tax preparer. You can also maintain greater control over the process, have a better understanding of your financial situation, and enjoy a relatively simple process from the comfort of your home.
However, filing taxes yourself can also be time-consuming and complicated, especially if you have a complex tax situation. You may make errors that could lead to penalties or an audit or miss out on important deductions or credits that could save you money.
Hiring a Tax Preparer To Do Your Taxes
On the other hand, hiring a pro can be a wise decision for those who have complex tax situations or limited time.
Tax preparers have the expertise and experience to ensure that your tax return is prepared accurately. They can help you take advantage of all the deductions and credits available to you and give money-saving advice.
However, hiring a tax preparer can be expensive, and you need to trust that the tax preparer is knowledgeable and ethical.
Step 3: Get All Your Documents in Order
Here’s what you’ll need to gather:
- Social Security numbers (yours, your spouse’s, and your dependents’)
- W-2 forms
- 1099 forms
- Contributions to retirement accounts
- Property taxes and interest paid on your mortgage
- Donations to charitable causes
- State and local taxes paid
- Expenses for education
- Medical bills
- Federal and state tax returns from the previous year
Once you’ve got the above documents, you’re ready to fill out your tax forms – either online or with your professional.
Step 4: Send Money to the IRS — Or Wait for Them To Send It to You
If you owe money to the IRS, you can submit it using electronic payments, debit/credit cards, cash, checks, or wire transfers. If you need to pay the government over time, look at IRS payment plan options. These include both short- and long-term payment plans.
If the IRS owes you money, try the following tips to get it as quickly as possible:
- Don’t file with paper — use online services.
- Set up direct deposit.
- Track your refund online.
How To Do Your Taxes by Yourself?
Doing your taxes is dramatically easier than ever before, thanks to the availability of tax preparation software. Start by gathering all necessary documents and information and carefully follow the instructions provided. Double-check your return for errors and make sure to file by the deadline.
How To Do Your Taxes as a Beginner?
As a beginner, you can use tax preparation software to handle your taxes. The software will walk you through your return step-by-step. When you’re finished, double- and triple-check your return for errors. If you feel like you’re in over your head, hire a pro.
How Do I Submit a W-2 Form?
If you are an employee, your employer will submit W-2 forms to the IRS and send a copy to you as well. If you are an employer, file W-2 forms with the Social Security Administration by January 31. Print copies to give to your employees; use privacy envelopes to make sure their information is protected.
What Is the Best Site To Do Your Own Taxes?
The best site to use to do your own taxes depends on your specific needs and preferences, but some great, popular options include TurboTax, H&R Block, and TaxAct. All offer user-friendly interfaces and a range of features.
Is It Hard To Do Taxes on Your Own?
Taxes can be complicated to do on your own, particularly if you are self-employed, have multiple businesses or properties, or need to apply for tax credits. If you have one employer and good records, however, it can be relatively easy — particularly with the aid of modern software.
What Is the Cheapest Way To Do My Taxes?
The cheapest way to do your taxes is to self-file using free tax preparation software, such as the IRS Free File program or Credit Karma Tax. Alternatively, you can also file by paper, though this takes longer to process.
Is It Better To Use a Tax Preparer or TurboTax?
Consider our pros and cons section above. It depends on your preferences — a tax preparer can offer personalized advice but may be more expensive.
What costs more – H&R Block or TurboTax?
The costs of H&R Block and TurboTax vary depending on the specific tax filing needs and options selected. Generally, H&R Block may be slightly more expensive, but both options offer free and paid versions with different features and pricing structures.
Is It Worth Paying Someone To Do Your Taxes?
If your income is complicated (multiple jobs, rental properties, LLCs, etc.), it’s probably worth it to have someone else do your taxes.
How Much Should You Pay Someone To Do Your Taxes?
On average, basic tax returns may cost $100-$300, while more complex returns could cost several hundred dollars or more.