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General Information, Tips, and Tools for Successfully Filing Taxes
It's tax time once again, and for many people, this can mean anxiety. Thousands of people each year file their taxes for the first time. This task can be very daunting to anyone who has never had to file or has never filed on their own before this year. There is a multitude of tools and websites available to make this process an easy one, no matter what your technical knowledge is. This article will act as your ultimate guide to successfully filing your taxes. We will go over the documents you will need, tools you can use to file, tax experts who can help you, what forms to fill out, and how to handle things like overpayments, overdue amounts, and filing extensions.
Personal Information and Documents
As your deadline to file your taxes gets closer, it is a good idea to get all of the necessary personal information and documents together in one place. If you have everything organized and in one location, this will ensure you don't forget anything and have problems with your taxes later on after you've filed.
Personal Information
In order to properly file your taxes, the Internal Revenue Service (IRS) has to know who is actually filing the tax return, as well as how many people will be covered or claimed on the tax return. You will need your social security number, your spouse's social security number if you're married, and the social security numbers of anyone you plan to claim as a dependent on your tax return.
Income Information
You will need several important pieces to file your tax return efficiently and accurately. All of your income information must be documented, as well as your spouse's if you're married. The pieces you'll need are listed below.
- 1099 Forms - These forms are used if you completed any contract work. If you're married, you'll need one from your spouse as well.
- Business Income - Accounting Records if You Own a Business
- Income from both local and state tax returns from the last few years
- Investment Income
- Miscellaneous Income - Lottery ticket winnings, jury duty, gambling winnings
- Rental property income
- Social Security benefits letter
- Unemployment income
- W-2 Forms from all of your employers that you worked for in the past year. If you're married and filing a joint return with your spouse, you'll need their W-2 Forms too.
Income Adjustments
If you can claim these additional adjustments, they can help you reduce how much you might owe in taxes. This increases your chances of getting money back in the form of a refund.
- Green Energy Tax Credit
- Homebuyer Tax Credit
- IRA Contributions
- Medical Savings Account Contributions
- Mortgage Interest
- Moving Expenses
- Self-Employment Health Insurance
- Student Loan Interest Paid
Credits and Deductions
Every credit and deduction you can claim can lower the amount of money you may owe the IRS come tax time. There are many available for you to look at, and you should have all of this information ahead of time. You will need to bring in documents that prove you paid these costs and expenses.
- Adoption Costs
- Charitable Contributions or Donations
- Education Costs
- Job Expenses
- Medical Expenses
- Moving Expenses
What are the Five Most Common Deductions People Put on Their Taxes?
Deductions are things you can pay during the year and subtract the total amount from your overall income level when it comes time to file your taxes. The top five deductions people put on their taxes are listed below.
- Dental and Medical Expenses. You can subtract any medical or dental costs from your income. This usually includes things like a cure, diagnosis, treatment, and prevention of diseases or conditions. Your doctor's fees, treatment costs, and any surgical fees are included as well.
- Home Mortgage Interest. If you pay mortgage interest on your home, you can claim it as a deduction. If you pay over $600 a year in interest alone, you will usually be sent a form that verifies the total amount you paid in. You use this to claim a deduction. Interest on up to $750,000 in mortgage debt is tax deductible, provided the mortgage debt is obtained via origination debt or the debt is taken on to build or substantially improve the dwelling.
- Real Estate Taxes You Paid. You can claim a deduction for real estate taxes paid as long as they are an accurate representation of the property value. This means if you upgraded parts of the house to increase the value, you could only claim the pre-upgrade value for a deduction.
- Charitable Donations. If you donate money to charities during the year, you can claim these expenses paid in as a deduction. You may only claim up to 50 percent of your adjusted gross income, and some states set the cap at 20 or 30 percent of your adjusted gross income.
- Income Taxes Paid. You can claim both state and local income taxes that you paid in during the years. The exception to this is you can only claim the income taxes paid on this income if the income is reported to the Federal government. If it is not, you can't claim this as a deduction. The 2017 Tax Cut and Jobs Act put a $10,000 cap on state & local tax (SALT) deductions.
Who Should Use Form 1040, 1040a or the 1040 EZ Form?
1040 Form. The 1040 Form is the generalized form you use to file your taxes if your income or your and your spouse's combined income is over $50,000 annually. It is also used if you have self-employment income and income from a property sale.
1040a Form. The 1040a Form is the form you would file if your personal or combined incomes are below $50,000 annually. You can only add IRA or student loan adjustments to your income with this form. You also do not itemize your deductions.
1040EZ Form. The 1040EZ Form can be used if your income is below $50,000. If you're married, both you and your spouse's income must be below $50,000 annually. It's better to use if you have no dependents, are under 65, and have an interest income below $400 per year.
The less complicated the form is you choose to use, the less room for error and complications there is. If you use the correct form, you may also have fewer costs in filing fees. If you're still not sure which form to use, you can click here.
Popular Tax Preparation Software
There are several tax preparation software tools and programs available to help you file your taxes correctly.
eFile.com
eFile.com lets you file your 1040EZ return form for free. You have the option of filing individually or jointly with your spouse. State Filing can also be done for a fee of $19.95, and there is a support team available 24 hours a day, 7 days a week to assist you with any questions. You can't claim dependents, make over $100,000 per year, or have a mortgage. The Standard package is free, and the Deluxe and Premium packages cost $29.95 and $39.95, respectively.
H&R Block eFile
H&R Block offers a free e-File option that allows anyone who uses it to import their tax information into their system from any competitors. You are also able to directly upload any tax documents, and file your tax return on any laptop, desktop, or tablet. H&R Block offers three versions for e-filing. The Basic edition is free; Deluxe is $54.99 a year, and Premium is $79.99 annually.
Jackson Hewitt
Jackson Hewitt offers several tiered versions of their tax filing software. There are no income requirements to use this software, and you can file both federal and state taxes for free. The free software will only support basic tax information like W-2s, unemployment income, and interest income. If you have any other income like student loan interest or dependents, you'll have to use one of their paid software options. The Basic package costs $39.95, and the next tier is Deluxe at $54.95. The final package is Premium, and that costs $79.95 annually.
Tax Act
Tax Act has free online filing for both state and federal taxes. They also have desktop software versions available as well. Their software works you through the pages using a question and answer format. They give you unlimited email and telephone support for all of your questions. You can track your refund directly once you file. Tax Act offers three versions of their software starting with the Basic free version. They also have a Plus package for $37 and a Premium package for $47 annually.
TaxSlayer
TaxSlayer enables you to file your 1040, 1040A, or 1040EZ online in an easy step by step process. The software will guide you through each page, and you will input your information when you're prompted. You can get W-2 imports free, and filing your state taxes with the free software will cost $19.99 per year. TaxSlayer also has four packages available for purchase. The Basic is free, Classic is $22.00 a year, Premium is $40.00 a year, and Self-Employed is $55.00 annually.
TurboTax
If you're filing a 1040A or 1040EZ form, you can use TurboTax's free software to submit your paperwork. You simply scan and upload your W-2 form as a file, or take a picture of the W-2, and TurboTax will fill in the right fields. You'll work page by page answering questions about your income, deductions, and dependents, and TurboTax will e-file your taxes once you're done. You have to make below $100,000 to be eligible to use this free software. You also must not have any large medical bills, and you can't claim any business, investment, or rental income. There are 4 packages you can choose from. The Basic package is free, Deluxe is $54.99, the Premier is $79.99, and the Self-Employed is $114.95 per year.
In Person Tax Preparation Agencies & Tools
If you're leery of filing your taxes on your own, several agencies will submit them for you. You call and schedule an appointment and bring all of your required tax documents with you. The tax preparer will look everything over and input it into their system. They will ask you questions about your filing status and any dependents, along with deductions.
- H&R Block. H&R Block offers in person tax filing as well as online. You call your local office and schedule an appointment. Your tax agent will block off a half an hour time slot for you. You show up and bring all of your required tax documents. You will also need proof of insurance and a driver's license or identification card. They will ask you questions about your filing status, income information, dependents, and miscellaneous income. Once they input all of this information, they will submit it to the IRS for filing. The filing price goes from around $50.00 up to $140.00 each time you file.
- Jackson Hewitt. Jackson Hewitt is another tax service that offers in person filing options. You call your local office and schedule an appointment and bring all of your tax documents with you when you show up. The tax professionals will fill in all of your information and input it into their system. Once all of your information is correct, they will go over it with you to double check everything is correct. If everything is correct, they will submit it in an e-file, and give you copies of your tax returns for your records.
- Federal Tax Calculator Our above simple Federal Tax Calculator is an easy tool that anyone who wants to know the amount of their federal tax return. You go to the site and input your filing status. You input your exemptions, income, payments, and credits. Once that is done, submit it, and the software will calculate an estimate of your federal tax return. The software also gives you helpful charts and definitions so you can be sure you're inputting the correct information.
Overpayment to the IRS
If you realized you made a mistake when you filed your taxes and overpaid, you can fix this problem. The first thing you do is a double check that you did overpay. If you found out you did overpay on your taxes, start the process of amending your tax return. You should fill out and submit a Form 1040X if you filed individually. Once this is submitted, fax or mail this into the IRS. The IRS will double check that this information is correct and if it is they will send you a check for the overpayment amount. It will take 8 to 12 weeks for you to get this check. There are three things to keep in mind when you're filing an amended return, and they are listed below.
- You have three years to file an amended return
- Your amended return must be filed on paper; electronic filing is not allowed.
- If you're filing a return for the current year, wait to get that back before you file an amendment.
Overdue Payments
If you're late filing your taxes, the IRS will apply penalties for each month you don't file your return. This penalty can be up to 25 percent of what you'll owe on your tax return, and it adds on every month you're late. You should pay your taxes as soon as you're able to, and if you can't pay the full amount call to set up a payment plan. There is a one-time filing fee to get the payment plan in place. If you continue not to pay, once your debt reaches around $25,000 a representative from the IRS will come to your home. They can have you put in jail for up to three years for failure to file, as well as additional penalties and fees. They can also garnish your wages until the debt is settled.
Filing an Extension
If you know you're going to be late on filing or paying your taxes, file an extension. Form 4868 is the form you want to fill out and send in as soon as possible. You can be granted up to six additional months to file and pay your federal and state taxes. This will also alleviate any late fees or penalties as long as you pay by the time the six month grace period is up.
This article has gone over several different options for you to be able to file online. We also touched on tools to help you and all of the information you will need to be able to file your taxes successfully. We listed deductions as well as what forms you have to file and the requirements. Finally, we went over what to do if you owe the IRS if you overpaid, and how to file an extension. If you take the information from this article, you should have success when it comes time to file your taxes.
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