How To Do Your Own Taxes Like a Pro
Few people get excited about doing their taxes even if they think they will get money back. They take a while to fill out unless you can use Form 1040EZ. Alas, most people cannot.
That leaves them to fill out kind of arduous Form 1040A or 1040. The latter has the most complexities to it. You must complete numerous Schedules to complete the taxes. This is to validate the information you submit on the main form.
When people had to do taxes on paper, it seemed as if they had to kill a tree just to finish one year of taxes. While the Internal Revenue Service (IRS) still accepts paper tax forms, they long ago switched over to electronic filing. You can do this for free if you make less than $73,000 per year, the median income in the US.
Choosing an Electronic Tax Preparation Method
I am skipping trying to explain how to file your taxes on paper. No hate to paper and pen, but you would need the entire IRS instructional manual to fill them out on paper. The US Tax Code book is about three inches thick, so you probably want to skip that notion even though you want to learn how to do your own taxes.
On the other hand, when you file electronically, the website’s app leads you through the process. You do not have to know what you are doing because the app knows. A small instruction panel explains every step of the process. This means you can complete all the forms and schedules without really knowing what you are doing. You still won’t have the same result as hiring a paid tax preparer, but you can do pretty well.
The IRS makes it easy to find tax preparation services it accepts and which you can use for free if you qualify under the income limitations. You can still use the electronic filing methods if you make more than $73,000, but you will need to pay a fee. You can quickly do an online tax filing price comparison by consulting the list of accepted partner sites on the IRS website. Also, check out the options for the active military because the IRS provides a free file option for the military that includes tax preparation services.
nine tax preparation services
The IRS offers nine tax preparation services with which it partners to accept electronic tax forms. You can choose from any of these services. It’s a good idea to explore each one first without starting your taxes to see which interface you like the best. Some prove easier to use than others and not every service has a stupendous graphical user interface (GUI).
- Turbo Tax
- TaxSlayer
- FileYourTaxes.com
- FreeTaxUSA
- 1040Now
- OLT Online Taxes
- ez TaxReturn
- Tax Act
- Free1040TaxReturn
After You Choose Your Preparation Service
You choose your service! Go you! You are not quite ready to file yet though. You need some paperwork first. Your tax forms will ask for data from last year. If you previously filed taxes, this includes the amount of your adjusted income from the prior year. You will need to look that up. If you filed on paper, dig out your copy of the form you turned in to the IRS. If you filed electronically, you could look it up on your electronic copy of your tax form which would be in a .pdf document that you downloaded when you filed last.
You will also need a cornucopia of forms. If you have a job as an employee of another person’s company, you need your W-2s or your paystubs for the calendar year prior to the year it is when you do taxes. Huh? Yeah, yeah. You’re filling out forms in 2021, so you need your information for 2020. This is all that will be included on your form that the employer sends you.
You get a different form if you work as an independent contractor. You should receive a 1099 form from each company for which you performed services. Sometimes, they do not send them out, and you must calculate it all yourself. Bleck.
How do you do that?
Dig out all 12 calendar months of bank statements or PayPal or other payments processor statements. However, it is you get paid, dig those statements out. You get to add this up manually! Check each statement for incoming payments. Use something like Excel to enter the numbers and calculate the total for you.
If you use an escrow service or two, you get to have a much easier way to do this. You can simply check the escrow service to determine the total amount it sent you during the calendar year for which you are completing taxes. Ah!
1040 A and 1040 also ask numerous questions on a wide range of items including home officing, investment income, property, alimony, etc. You need all the financial information to complete these.
Now that you have everything you need sitting in front of you, click the link on the IRS website to go to the tax preparer you chose. Create your account if that is the first time you used such a method.
Depending on which service you choose, your opening screen will vary. You will always go in the order that the paper form takes though. That means you start with your name, Social Security Number, and address, then move onto financial data.
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Filing Taxes Takes Time
Regardless of the method you use, the completion of these forms takes a significant amount of time. You should set aside a day to complete them. It may not take the entire day but expect to sit in front of the computer for at least four to six hours.
You will probably need coffee and biscotti. I recommend Starbucks.
Part of the reason it takes a while to complete is that you have to look up the amounts to enter. Calculating items such as the equivalent of your income you spend on your home office if you have one takes time. You need to determine the percentage of your home you use for this purpose.
If you own a business or work as an independent contractor, you need to also enter information for your company’s business machines, the fancy-schmancy term for your computers, printers, scanner/copier, etc. If you work as a photographer or videographer, this includes cameras, lights, etc. that you own. If you work as a plumber or carpenter, this includes your tools including that nifty bandsaw. When you list them, you must decide whether to claim them for one year or across multiple years. This is not an arbitrary decision. Items like your computer, you should choose to claim over a period of years. This determines your deduction value. The income tax preparation software helps you with this. Those panels I talked about on the side of the screen will explain this snazzy stuff. At a click, you will get help from the software in choosing this.
Set aside a day that you do not work. If you have kids, get your spouse to take them somewhere, so you will have no interruptions. This part really matters! You need to be able to devote your entire concentration to preparing your taxes.
Before You Try to Start on the Taxes
You might be gung-ho to start on your forms. The IRS has already begun accepting returns, and you might want to file this very minute. Perhaps you know you will obtain a refund. Maybe you know you will qualify for the third economic benefit payment. I understand, but you do need to have all the appropriate information in front of you first. That means you need your W-2s and 1099 forms and sometimes, employers drag their feet issuing them. They usually have until March to send those suckers out.
Also, make sure you really know what you are doing. You do not need to know the whole tax code to fill out your taxes, but you do need to willingly sit down and pay attention to what you fill out. The form must completely and accurately represent your tax situation. If you feel unsure, go to a tax preparer.
Hiring a Tax Preparer
I know you want to do it yourself, but if you suck at math or organization, or you just feel easily overwhelmed, Form 1040 A and Form 1040 are not for you. You should hire somebody to fill it out.
Now, about that somebody. They need to have an accounting degree. They should also be a certified public accountant (CPAs). Many tax and accounting services hire former IRS examiners as tax preparers. These folks only work a few months out of the year and CPAs get bored once they retire. This is to your advantage. No person can better keep you out of trouble with the IRS than a person who worked for the IRS catching people who did not fill out their taxes correctly.
You can try H & R Block or Jackson Hewitt. They have many locations across the US. Also, conduct a Bing or Google search for “tax preparers near me”. This will generate results for local CPAs and tax preparation businesses. You can choose one near you or phone each and see who seems friendliest.
Once you land an appointment with them, you gather all that paperwork you dug out and take it to them. This includes receipts for business purchases you made, business travel you conducted and paid for yourself, etc. They will probably give you a list of items when you phone them or direct your to a page on their website or email you with a checklist before they meet with you. Bring every item listed. They will need it.
Tips to Make Doing Your Taxes Easier
No, really. Completely avoid lying. Make sure your numbers accurately represent your reporting. You can and will get audited if you lie. That can result in massive penalties and jail time. Just be honest and life will go well.
All those pieces of paper and electronic files I mentioned? Gather them together well ahead of time. You will make things easier on yourself and/or your tax preparer.
You need to set aside a day. Really. If you finish early, you can go do something fun to treat yourself.
Let’s say the time has passed, and you still have no 1099s, or your employer never sent you the forms they were supposed to send. Flay them with a wet noodle and file the extension form with the IRS. This lets you ask for more time to file the taxes, and you will not get into trouble for not having completed them by April 15, 2021.
Let’s say you finish your taxes, and you have a whopper of a bill. You use the option on the tax preparation form that offers to find you more deductions. It can’t. You still owe the huge tax bill. You honestly do not have the money to pay it all at once. That is okay! The nice folks at the IRS will let you make payments. You do not have to pay it all at once. You fill out a form to request a payment plan. You can submit this electronically, too.
Once you send it in, you make the first payment which you determine by dividing the total you owe by the number of months into which you requested to divide the payments or the minimum that the IRS website shows. If the IRS website shows an amount larger than the one you calculate, you need to make that payment. That is all. You can make these payments electronically, too
Getting Started
You can easily file your taxes. It does not take as long as you might imagine, but you will need a few hours set aside to learn how to do your own taxes. Just make the coffee or tea, sit down pre-organized, and get to it. Maybe you will luck out and obtain a refund. Put it in savings if you can, otherwise, pay off debt with it. A refund should help you get ahead in life.
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