DIY
It’s All In Your Hands
Are you looking to file your taxes? You’re finally there. The big day is here, and you’ve got everything together to file your taxes. The only thing left to do? File them yourself, without any help from an accountant or tax professional.
3 Ways You Can Get Your Taxes Done By Yourself:
Paper Forms:
Tax Software:
Free IRS E-Filing:
What You Need to Know About Filing Your Taxes:
– Keep track of everything, don’t estimate. Save every receipt, canceled check, and credit card statement that represents money spent or income received. If you are buying something for future use(e.g., clothes), you can still document it by keeping the receipt or other proof of purchase. Be sure it isn’t reported as income until you start using it so that way there is no confusion about what should have been included in taxable income for this year versus next year.
– The best place to keep all of this documentation is in a file folder or envelope that’s easy to access at tax time because, let’s face it, it’s not the most organized thing to do.
– Keep track of any changes in your income, deductions, or credits throughout the year; you might need it when tax time comes.
– If your situation is straightforward and there are no exceptional circumstances that will affect what you have to report on your taxes, using a tax software program can be very helpful.
– The tax forms that you need will be labeled as something like “1040”. These are the primary forms where you report information about yourself and any dependents, calculate your taxable income, and figure out how much tax you owe.
How to Prepare Your Own Documents
– The first thing to do is gather all of your documents to be easily accessible when filling out these forms.
– You’ll need to know some basic information about yourself such as name, address, social security number, any dependents you have living with you (and their ages), and marital status. If filing jointly for married couples, you should both fill out separate copies of these forms because some questions will apply only to the taxpayer filing, while others will apply to the spouse.
– The most basic form is 1040 because it’s where you report the total income you received during the year.
– There are several types of taxable income, including wages, salary, interest, dividends, and gains from selling assets reported on separate forms, so make sure to check what types of income apply for your situation when filling out these forms.
– It’s also important to note whether this is your first time filing taxes or if there were changes to your tax situation in any way throughout the year. If it is your first time filing, you might be eligible for certain tax credits like the Earned Income Tax Credit (EIC) or Child Tax Credit (CTC), which might affect the amount of tax you end up owing. Household expenses like homeowner’s contributions and your charitable donations can also reduce the taxable income you have to report or any additional taxes you owe. You should also know how much money was withheld from your paycheck if you were employed during the year, and how many dependents were claimed on your W-4 form. These amounts will be subtracted from your income.
– Keep track of any adjustments to your original income such as alimony paid, IRA contributions made, or property taxes paid throughout the year. These changes could affect what tax credits or deductions apply to you as well.
– Whether filing jointly married couples or just filing separate returns for yourself, each person’s tax situation is different, so everyone should fill out their separate copy of these forms.
– You’ll need your income information to calculate the amount of taxes you owe or might be eligible for a refund on your federal taxes. It’s also important to consider any credits you might qualify for, which are subtracted directly from the total tax owed, before determining how much money you have to pay by April 15th.
– There are several types of credits available, but if you have children, you might be eligible for the Child Tax Credit (CTC), which reduces the taxable income that has to be reported. Suppose you were unemployed during part or all of last year. In that case, there could be additional credits like the Earned Income Tax Credit (EIC) or additional general tax credit that you might be eligible for, and these credits can reduce the amount of tax you owe.
– There is a set of worksheets to help taxpayers figure out which forms to file by figuring out their taxable income and any credits they’re eligible for. These can be found online.
– You should know your adjusted gross income(AGI), taxable income, filing status, whether you qualify for any dependents, and if you filed married separately from your spouse when filling out these worksheets.
– This is where you’ll find all of the information needed to complete the W-4 form that was included in your packet, along with instructions on how many dependents were claimed and marital status.
The amount of tax you owe or the total refundable tax credits you might qualify for can be calculated by filling out these forms.
When filing married jointly, both spouses should fill out their copy of these forms to know exactly what to expect when filing taxes and how much is owed by April 15th.
– The amount on this form indicates the total income received during last year, but this doesn’t mean that it’s taxable income since there are additional items like alimony paid which reduces your Adjusted Gross Income(AGI).
– You’ll need to enter your AGI along with any deductions like student loan interest or IRA contributions to find your taxable income, which is used for determining the total tax owed.
– Figuring out if you’ll get a refund or have to pay taxes can be calculated by multiplying the total amount of taxable income by the tax rate that applies to your situation and then subtracting any credits that might use.
– The final numbers here indicate the total income earned throughout the year, what credits you might qualify for which reduces your taxable income, how much money was withheld from your paycheck during the year, and whether there’s anything left over after all taxes are paid.
Take the guesswork out of your financials.
Paid CPA Advantages:
-Hiring a professional can be expensive, but it’s worth the peace of mind that someone else has already done all the research necessary to file taxes.
– Trained professionals will know which credits you qualify for and whether you’re able to claim certain deductions. They’ll also have more experience filing taxes accurately than people who might not have filed in a few years.
Many businesses send out information on various types of tax breaks throughout the year, so these professionals should be aware of everything that applies to your situation when filing.
DIY Advantages:
– You will save money by doing your taxes unless some complicated forms or credits need to be claimed during specific years.
– This process is relatively simple but complex enough that most people would benefit from hiring an accountant who specializes in filling out taxes electronically, which allows them to file their taxes quickly and efficiently.
– The most significant advantage of doing your taxes is getting a bigger refund without the hassle of going to an office or having to pay professionals a fee for their services.
– One big drawback should be obvious: the process can become extremely complicated if you don’t have a fundamental understanding of what applies to your specific situation or how tax laws might change from year to year.
DIY Limitations:
– There are some limitations when going through this process yourself since you have to understand what applies to your specific situation and eligibility for different deductions and credits.
– Refunds can be calculated by using an online tax calculator in just a few minutes. In contrast, it might take several hours to complete this process with the help of a professional.
– You can go online and find general guidelines for filing taxes yourself, which you might not be able to access with a professional unless they’re willing to share their experience.
– Many people will spend money to hire an accountant but end up getting the exact refund amount as you would if you had filled out the forms yourself, so it’s good to look into what credits or deductions apply to your situation before deciding whether or not it makes sense financially.
DIY vs. Paid CPA:
– If you’re making less than $62,000 on a joint return or under $31,000 as an individual, then hiring a professional might not be worth the money since tax preparation software would allow you to file for free.
– A professional can help people with an annual income ofover$62,000 file accurately, but the online programs are great for anyone who wants to file their taxes themselves without any hassle.
– Since the software is cheaper than hiring a professional, you could save money by filing on your own unless you have more complicated tax forms that need to be filed or it’s unclear if certain credits apply to your situation.
– Paid CPA might be worth the extra cost depending on how much time you’re willing to spend learning about potential deductions and credits which apply to your specific situation.
– Most people will save money by doing their taxes since they don’t qualify for many tax breaks or cannot claim deductions during specific years unless they have paid accountants on retainer.
Paid CPA Limitations:
- It's difficult for accountants to figure out which credits apply to each individual since they're only human and might not know about all the latest tax breaks available unless they specialize in specific areas such as small businesses, freelancers, etc.
- Even professionals might be confused about which deductions apply to your specific situation since it can be challenging to track when certain credits or deductions are applied.
- The most significant advantage of doing your taxes is getting a bigger refund without the hassle of going to an office or having to pay professionals a fee for their services.