10 Tips for Doing Your Taxes Yourself

W-4 Tax Form

If you’re planning to file your own tax returns this year, you’re in good company. Approximately 33 percent of Americans file their own taxes each year.

As you’re gathering all of your 2017 tax documents and preparing to file your taxes there are some important things to keep in mind. Following these tips will help you avoid common pitfalls and mistakes and ensure you keep as much of your own money in your pocket as possible. After all, the less money you have to give to Uncle Sam, the more you can put towards reaching your financial goals, paying off debt, or otherwise positively impacting your credit score.

Know the filing deadline

We all have April 15 burned in our brains as the last day to file taxes. But if that date falls on a weekend or a holiday the due date can be different by a couple of days. Of course, this is always to the taxpayer’s advantage, as no calendar occurrence move the due date prior to April 15 in any year. If the date is different it will always be later than April 15. For example, the filing deadline this year is April 16, 2018.

Make sure you need to file

If you’re not sure whether or not you need to file, you can find out using the IRS’s online Interactive Tax Assistant. By answering some basic questions about your filing status, gross income and whether you had federal income tax withheld, you will be able to determine whether or not you need to file for a particular tax year.

Review last year’s tax returns

Reviewing the information from the previous year’s federal and state tax returns will make the current year’s filing much simpler. Much of the information will be the same, including employer federal ID numbers, children’s social security numbers, etc.

Gather all necessary income documentation

Make sure to gather all forms that include income information, specifically those from employers and financial institution. These includes:

  • Form W-2 (wages)
  • W-2G (gambling winnings)
  • 1099-INT (interest)
  • 1099-DIV (dividends)
  • 1099-B (investment sales)
  • Combined 1099 (brokerage combined tax statement)
  • 1099-MISC (independent contractor work, royalties)
  • 1099-R (retirement distributions)
  • K-1 (MLP, Partnership or S-Corp share of income)
  • SSA-1099 (Social Security benefits)
  • 1099-G (unemployment benefits and state tax returns)
  • 1099-C (forgiven debt).
  • Income Adjustment Documents, including Form 1098-E (student loan interest); 5498 (IRA contributions); 5498-SA (HSA/MSA contributions); and 1098-T (tuition).

Determine whether or not you should itemize deductions

Itemizing deductions is only beneficial of those deductions will exceed the standard deduction. If you’re using a tax software program it will guide you as to what you should do. If you do opt to itemize your deductions, you will need forms including 1098 (mortgage interest) as well as receipts for expenses such as charitable contributions, unreimbursed employer business expenses, and medical expenses.

Don’t forget your state taxes

Most states require a separate state tax return to be filed. There are seven states that don’t collect state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

Check and double-check your return

Before you drop that tax return in the mail or hit submit when e-filing, make sure that you’ve checked the figures you’ve entered when filing your return. A mistake can mean a filing error that could give you an overinflated refund you’ll have to pay back later.

File on time

Even if you owe an amount you cannot pay in full by tax day, it’s important to file on time and to pay as much as you can. Doing so will allow you to avoid a late filing penalty and to minimize interest charges on any unpaid balance. If you cannot pay your taxes in full, you can request an installment agreement from the IRS.

Tax advantage of free filing

The IRS offers Free File to file your federal taxes without paying any fees. The amount of your adjusted gross income determines the version you will need to use. If it’s $66,000 or less, you can use the free filing software. If your adjusted gross income is higher, you will use Free File fillable forms that are the electronic version of its paper forms.

File electronically

You can still file paper returns and many filers do so because they’re uneasy sending their personal and tax information over the Internet. However, e-filing via the IRS website is very safe and it will expedite your refund if you’re getting one.

If you’re concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated each month.

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4 Things You Need to Know About Filing Your Taxes Early

No matter your motivation — whether it's to get them out of the way or get your refund sooner — here's what you need to know about filing your taxes early.

While getting a tax refund is fun, preparing and filing your taxes rarely is as fun.

As you think about how much you pay in taxes, consider this – in 1944 to 1945, the highest marginal tax rate was 94% and applied to any income more than $200,000 — or about $2.7 million today, given inflation. While I wouldn’t mind making $2.7 million a year, giving almost all of it back would make me want to delay filing as long as possible. (If you do owe, make sure you pay on time or work out a payment plan so you don’t hurt your credit. Want to see if your taxes have affected your credit at some point? Take a look at your free credit report snapshot on Credit.com.)

Fortunately, our tax rates aren’t that high anymore and almost 73% of tax filers get a tax refund. So, this year, why not go for the quick financial win and get your taxes done early? And if you end up finding out you owe, knowing sooner can help you budget to have money to make that payment.

1. Wait Until the Season Starts

If I’ve done my job convincing you to get your taxes done early, you may be eager to file so you can get your return as quickly as possible, thinking the first of the year is the day to start (so you may feel like you’re already behind).

While I appreciate the enthusiasm, wait a moment — the IRS doesn’t start processing returns until the start of the “tax filing season.”

The tax filing season for 2017 doesn’t start until January 23. You can prepare and file before the 23rd, but tax preparation software (and an accountant) will hold returns until the start of the season.

You can start getting everything you need together now, but don’t rush to file until after the tax filing season starts.

2. Keep Track of Outstanding Documents

Keep a checklist of all the outstanding documents you need to prepare your taxes. As documents come in, put them in a special folder and mark them off your list.

The typical taxpayer will have a W-2 from their employer and 1099 Forms from banks, brokerages and other income sources. Issuers need to get those forms in the mail by January 31, so you should have them all by early February. The only exception is a Form 1099-B (Proceeds From Broker and Barter Exchange Transactions), which has a mailing deadline of February 15. Many institutions now issue these forms electronically, so if you haven’t received any of yours in the mail, you may opt to check your account online.

If you have a mortgage, look for a Form 1098 from your mortgage company because that will indicate how much mortgage interest you paid that year. If you have student loans, be on the lookout for a 1098-E from your loan servicer(s). Companies are required by law to have these in the mail by February 15.

If it’s mid-February and you’re missing a form, contact the institutions responsible for mailing it to you.

Once it’s officially tax filing season and you have all your documents, you can start filing.

3. Consider Using Tax Preparation Software

Tax software is probably the quickest way to complete your taxes because the software is designed to be as easy to use as possible. If you have a very simple tax situation, many tax software companies have programs that allow you to file for free. (If you’ve never used this type of software before, the first step is to compare your options and decide which one is best for you.)

Most tax preparation software uses simple questions to walk you through complicated tax forms step by step. The software can help you maximize deductions and find any tax credits you qualify for. Your tax situation may seem tricky to you, especially if you’ve tried to decipher everything on Form 1040, but the companies behind tax preparation software have seen millions of returns, which makes your situation easier for them.

Many of the tax prep software systems also integrate with payroll providers and banks, so if you give them access, they can import a lot of your information automatically. This cuts down on the data entry you’ll need to do and can help reduce errors. In some cases, they can use this integration to get information off a form you haven’t received a hard copy of yet.

4. E-File

This tip won’t get your taxes finished earlier, but can help you get a refund faster.

When you e-file, your return gets to the IRS faster. With that, you bump up your odds of having your return getting processed faster, which means your refund is sent to you sooner. If you elect to get a direct deposit, the refund gets to you even faster. Typically, the slowest way is to file by paper, mailing in your return and requesting a check in the mail.

So, if speed is of the essence, e-filing your return is the quickest by far.

After you’ve filed, you can check the IRS Where’s My Refund tool to see where your return is in the process. You must wait 24 hours after you e-filed or four weeks after mailing a paper return (see what I mean about mailing being incredibly slow?) to check the status.

Image: JohnnyGreig

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