“Tax season is almost here, sharing a guest article from fellow life and career coach Julie Morris. The article has been written keeping individual tax and small business owners based in United States.”
For some reason, tax season has been given a bad reputation and is often associated with stress, anxiety, and even chaos. According to a Pew Research survey, 56 percent of people dislike doing their taxes, citing reasons such as complicated paperwork and the amount of time that must be dedicated to doing taxes. However, 34 percent like, and even love, doing their taxes and with a few tips, you might be able to make your tax preparation experience a little more enjoyable.
Do I Need to File?
Before you get into tax mode, it is important to stop and think about whether or not you are actually required to file. According to Efile, the filing requirement depends on your filing status (single, married filing jointly, married filing separately, head of household, qualifying widower), age, income, dependency status, and other special requirements. If you are unsure, use the IRS tax return tool to determine if you are required to file a federal tax return. You will need basic information such as your filing status and federal income tax withheld.
According to 1040.com, there are some situations when is beneficial to file even if you aren’t required to such as if you had federal income tax withheld from your pay or you made estimated tax payments. In addition, there are a few tax credits that could give you a refund even if you don’t have to file such as the Earned Income Credit, Additional Child Tax Credit, or the American Opportunity Credit. In order to qualify for these credits, you must file.
Gather Important Documents
As tax season draws near, you will receive a variety of tax documents in the mail. Make sure you keep and store these documents in a safe place where they won’t get lost in the shuffle of everyday life. Time states that there are a plethora of documents you might receive. For income information, you might receive Form W-2 (wages), 1099-INT (interest), 1099-DIV (dividends), 1099-B (investment sales), 1099-R (retirement), SSA-1099 (Social Security benefits), 1099-G (unemployment benefits and state tax returns), 1099-C (forgiven debt). If you plan on itemizing deductions, you will need forms such as a 1098 (mortgage interest), 1095-A (insurance marketplace statement), 1095-B (health coverage), or 1099-SA (HSA/MSA distribution.
If you receive a document and you are unsure if it will be necessary come tax time, keep it anyway. Consider storing all tax documents in a folder or binder with labels to make finding what you need easy and quick.
Decide Which Method to File
Do you want to have a professional file your taxes or do you prefer to file your taxes yourself using either e-file tax software, like 1099 software, or paper filing? Nerd Wallet suggests taking into consideration how complicated your tax situation is, how much time you have to dedicate to the process, how much you want to spend, and how involved you want to be. For example, paper filing your return is free other than the cost of postage, but tax software for preparing basic returns could cost anywhere from $20 to $50, and increases to $100 or more if you plan to itemize. If you choose to hire a tax professional, you can expect to pay about $175 for basic returns, and $275 for an itemized return. These prices aren’t set in stone, and it will vary with each situation, but it shows just how much of a difference the method of filing makes. While some may only be comfortable with a professional handling their taxes, others may find doing their own taxes to be easy and more convenient.
Regardless of what method you choose, try to make a decision in advance of tax season to ensure you are able to get your taxes completed before the deadline of April 15.