One of the quintessential signs that you are an adult is when you have to file a tax return. Follow these simple steps for filing tax returns like a boss!
How to file tax returns really is something they should teach you in school. We all must do it as adults, but many people don't even know where to start. If you’ve never filed a tax return before, this easy-to-follow guide will give you the confidence to get the job done in a quick time.
As if filing your taxes isn’t a daunting enough prospect, this year some people have the added admin of documents about Covid-19 relief. For example, pandemic stimulus payments and advanced child tax credits. If you are feeling overwhelmed, just take a deep breath and work through the process step-by-step. Let’s begin!
These are some of the more common forms and documents that you might need when filing tax returns:
You can prepare your taxes in one of four ways. You can do it the good old-fashioned way with pen and paper. Or you can go online and use IRS online forms or specific tax preparation software for filing tax returns online (e-filing). The third option is to ask a professional, AKA a tax preparer, to file your tax return for you.
Complete your tax returns on paper forms and mail them to the IRS. This method is only a good idea if your math is infallible.
If your gross income falls under a certain threshold, the IRS has free tax preparation software you can use to prepare your tax return. The software has features to help you determine whether you can affect any deductions or credits. For individuals with a gross annual income higher than the specific threshold, the IRS online forms are electronic versions of the paper forms that make the calculations for you.
There are many tax return calculator software packages and tax-preparation websites to choose between. Some tax returns calculator sites are even pitched at specific functions, such as self-employed individuals or people with complex tax situations. Depending on your needs and what you are willing to pay, the services offered by these software packages or websites range from basic to comprehensive.
A certified public accountant (CPA) or an enrolled agent (EA) can act as a tax preparer. This is by far the most hands-off method, but, correspondingly, also the most expensive. In addition, you must still make time to review your returns to ensure accuracy and that everything is included.
This depends on your marital status. Will you be filing as an individual or filing jointly with your partner? The contribution you make towards household expenses impacts your filing status.
Deductions decrease the amount of your taxable income. The standard deduction amount depends on several factors, including your age, income, disabilities, and filing status. Most people choose to use the standard deduction. However, if your allowable itemized deductions equate to more than your standard deduction, you should choose to file your tax return with itemization.
Or get a software program to do it for you! Add up your deductibles and credits. Determine whether you owe the IRS money or whether you are due a refund. If you owe money, make the payment. Choose between making a direct payment from your bank account (Direct Pay) or using your debit card, credit card, or a digital wallet such as PayPal. If you are unable to pay the full amount, you can also choose to apply for a payment plan.
The final step in the how to file tax returns class is actually filing your return. Do this before the deadline. You can choose to go the e-filing route and submit all your documents online. Alternatively, you can place your tax return, all appropriate forms, and supporting documents into an envelope and post it. Be sure to sign and date your return. Make sure to have your envelope postmarked before the filing deadline.
Readying the paperwork for filing your tax return is a schlepp, without a doubt. However, if you take the time to come to grips with the process, you can even find ways of saving money here and there with extra deductions and credits. Imagine if the IRS owes you money rather than the other way around!
It is critical to set time aside to get this task done before the filing date. Paying penalties for late filing is a huge waste of money. To avoid paying interest and penalties for late payments, keeping on top of your tax paperwork can help you to know how much you will need to pay, should that be the case, so that you can budget for it.
A bonus for filing your tax return early: avoid tax-related identity theft and you should receive your tax refund sooner (if you are owed one).
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