I’ll admit that tax season gives me the nervous sweats. I get anxious and overwhelmed that I’ll miss something important especially when I close in on the deadline before even taking a look at my W-2. This year I decided to educate myself on all things taxes and break it down into easy manageable steps. Since I believe in sharing the wealth, I’ve compiled my learnings into a tax guide so you can get your taxes done like a boss and get back to your birthright of Netflixing.
If you are under 65 and earn $10,400 or more per year, you must file by April 15. And some of you might be thinking, it’s too soon. Well, the IRS started processing tax returns on January 27, 2020, so you can have your fat refund as soon as you get to work on filing those taxes.
Gather your documents
First things first, find your W-2 (this might be the hardest part) that you should have received from your employer back in January. You’ll need to report your individual income on form 1040.
If you have a side hustle, good for you for having the energy for that type of thing, but you’ll need form 1099 for this, as well. You may need several other forms to report your deductions, but I’ll get to this below.
(Want to know some of the deductions you can make: check it out here.)
Be a freeloader
Download the Free File Software at IRS.gov. If your income is below $66,000 you can use the free software instead of forking money over for some commercial software or tax preparer. And you get the added satisfaction of knowing you did it yourself. You’re a strong, independent lady who doesn’t need the help of anyone (it helps to talk yourself up before diving in).
Get some easy credit
We are talking tax credits that help increase the amount of your refund (aka fatter check!). Get credit for dependents, health care, education, and so forth.
Determine whether to itemize your deductions
Deductions reduce your taxable income, so the more deductions, the better you’ll fare. Choose the method that provides the highest possible deduction. Most tax software will help you make this decision.
Standard: This one is easy peesy. Just take the standard deduction based on your marital status and household size to reduce your taxes. Voila! Some people don’t qualify for the standard exemption and therefore should itemize. Be sure to double check.
Itemized: Popular itemized deductions include but are not limited to:
- Property tax because when you pay your local government, your federal government pays you back!
- Charitable donations, like all the clothes you donated to Goodwill that could never see the light of day at your new professional job.
- Student loan interest (the one time you might feel good about debt, right?)
- Mortgage interest. (Hopefully your refund helps you upgrade from a futon to a real bed, now that you have a place to call your own.)
Here’s a full list of deductions. Think of them like you think of Pokemon: gotta catch ‘em all.
Find your taxable income
Once you have entered your income, credits and deductions, it’s time to find your taxable income. Again, your tax software will do this for you. #showmethemoney
Get your refund fast
For a speedy refund, set up direct deposit and then e-file. Filing electronically ensures the fastest possible refund and if you set up direct deposit, the cash money is sent straight into your account.
Listen up, self-employed folks
If you have a small business or are an independent contractor (think Uber driver, AirBnb rent), you must file your net earnings if they $400 or more. Self-employed individuals report income annually like everyone else but must pay an estimated tax quarterly.
(Find out how saving for your retirement can help you reduce your tax burden, tax-smart freelancer.)
Don’t play yourself
Beware of the tricksters out there. Some of these scammers can sound legitimate but are only looking to take away your hard-earned dollars (and that’s only for the government to do). Review IRS’ Dirty Dozen Scams so you don’t find yourself in a sticky situation when you make that last-minute Hail-Mary attempt to make the deadline.
If you’re really not ready to do your taxes and you won’t make the April 15 deadline, you can file for a six-month extension. Be aware that penalties and interest may apply to money you owe after April 15.
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