Doing your own taxes is easy with e-filing. Next year, don’t waste money hiring someone else do the math, make sure you keep your pay slips and records of your expenses and familiarize yourself with the process. Here’s how to do your own taxes and save.
Approximately 43% of Americans take care of their taxes themselves.
Tax season can bring headaches to many U.S. taxpayers, especially for those who don’t want the hassle of handling tax filing on their own.
However, it is possible to do your own taxes and achieve the largest refund possible. You don’t have to be numbers-savvy to do so, either.
In this post, we discuss how to do your own taxes to your financial advantage.
1. Gather Documentation
The secret to successful navigation of your tax filing lies in the documentation. You’ll need to collect all relevant paperwork concerning income, employment, and expenses.
If you are a regular employee at an institution, you will likely receive a W-2 tax document from your employer several months before the April filing deadline. This form details your gross and net income (as well as taxes paid) for the prior year.
Independent contractors, business owners, and self-employed individuals will have different documents. These may include 1099-MISC, receipts of cash payments, personal revenue documents, and beyond.
Additionally, the Internal Revenue Service recommends that taxpayers gather documents related to investment, rental property, and unemployment income. If you receive social security benefits or acquired cash through lottery or gambling winnings, these should also end up in your stack of tax papers.
Lastly, collect all paperwork that accounts for relevant expenses. This includes business and work-related expenses and costs associated with childcare, education, loan interest, and health insurance.
For a full tax document checklist, click here.
2. Understand Eligible Deductions
When you do your own taxes, the easiest way to a fat deduction is financial knowledge.
Understand which credits and tax deductions you are eligible for. If you are a college student, for example, you are likely eligible to deduct student loan interest and education costs.
Self-employed individuals can deduct costs for home office and work-related expenses. If you have dependents or are a first-time homebuyer, you may qualify for certain credits.
Check out the IRS’s full list of qualifying deductions before you do your own taxes.
3. Use E-Filing Software
The easiest way to do taxes involves using e-filing software. We recommend programs like TurboTax because they enable taxpayers to file from the comfort of their own homes.
What’s more, e-filing software walks taxpayers through the entire filing process, checking for all viable deductions and minimizing errors. In fact, e-filed taxes have a 0.5% error rate, in comparison to a 20% error rate for paper filed returns.
E-filing enables taxpayers to file full returns electronically. You don’t even have to go to the mailbox or worry about buying printer ink!
Taxpayers who e-file are also likely to receive a faster return right into their checking or savings accounts.
Programs like TurboTax also offer specialized filing services for independent contractors, business owners, and families. They also have a close alliance with Quickbooks, a personal finance management system that can generate invoices, create a paystub, and keep track of expenses.
How to Do Your Own Taxes
Tax season does not have to be daunting. If you’re curious about how to do your own taxes successfully, invest in e-filing software.
When you electronically file your taxes, you can feel confident that you are doing so accurately. This is particularly the case if you have gathered appropriate income and expense documentation and understand your eligible deductions.
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