With e-filing taxes gaining popularity, more and more Americans are flocking to their computers to file their taxes. The ease of using tax-filing websites and software has streamlined the process and made it simple for Americans to prepare their taxes without professional help. If you’re one of many Americans planning to self-prepare your taxes this year, it’s crucial to follow a few best practices and tips, whether you’re filing with paper and pencil or tax software.
VERIFY TAX FILING DEADLINES
The tax filing deadline for 2020 returns is Monday, May 17. Although you may assume April 15 is every tax filing deadline, this isn’t always the case. If April 15 lands on a holiday or weekend, the date will likely move. For example, in 2018, April 15 fell on a Sunday. Then the following day was Emancipation Day, a holiday in Washington D.C. Therefore, the deadline was moved to April 17.
So, to avoid late penalties, make sure to know all of your filing deadlines well in advance.
TAKE A LOOK AT PREVIOUS RETURNS
Glancing over your previous year’s returns might make it easier to file this year’s returns. You’ll have a majority of the personal information needed right in front of you such as social security numbers. Using last year’s returns can also reduce the chances of mistakes this year.
COLLECT ALL DOCUMENTATION
You’ll need to collect all the documentation required to file your taxes. This means you need any income records or statements from financial institutions like your bank. Some documents may include:
- Employment document (W-2)
- Unemployment document (1099-G)
- Self-employment documents (1099s, Schedule K1, 1099-MISC, records of other expenses, etc.)
- Rental income documents (Tax payment estimate record, income and expense records, etc.)
- Retirement income documents (IRA or pension income (1099-R), Social Security income, etc.)
- Income from assets or dividends documents (Income from the sale of a property, dividend income (1099-INT), etc.)
- Additional income or losses documents (Hobby income, gambling income, jury duty records, etc.)
DECIDE IF IT MAKES SENSE TO ITEMIZE YOUR DEDUCTIONS
In the past few years, standard deduction amounts have continued to increase, making it less desirable for taxpayers to itemize their deductions. Because itemizing only makes sense when your deductions exceed the standard amount, many taxpayers may opt for the standard deduction amount. If you choose to use tax filing software, it could help you determine your situation's best option.
If you choose to itemize, you will need records of all deductions such as charitable contributions or a mortgage interest statement (1098).
MAKE SURE YOU INCLUDE YOUR STATE TAX RETURN (IF REQUIRED)
Most U.S. citizens have to file an income tax on some level. However, if you live in any of the following states, you won’t need to file a separate state tax return:
- South Dakota
Two states, Tennessee and New Hampshire, tax investment income but not earned income.
LOOK OVER YOUR RETURN WITH A FINE-TOOTH COMB
Even though it’s exciting to finish filing, don’t get carried away. Double-check the figures and information you’ve entered regardless of whether you file electronically or not. Filing incorrectly can lead to penalties and an overinflated refund you’ll be paying back.
UNDERSTAND YOUR FILING OPTIONS
You have the option to file your annual income tax return without paying fees using Free File. The version depends on your adjusted gross income. If it’s less than $66,000, then you can use free filing software. Anything higher requires fillable forms that come either in paper format or electronically. If you’ve been nervous about filing online, know that the IRS website is safe and can even quicken your refund turnaround.
SUBMIT YOUR TAXES ON TIME
The most crucial tip is to pay your taxes on time, even if you can’t pay in full. If you don’t, you may face a late filing penalty and interest. You may even risk losing your refund. However, if you’re entitled to a refund, you can track it using the IRS tool “Where’s My Refund?”.
GETTING THEM DONE RIGHT
Without a doubt, tax filing season is one of the most stressful for Americans. Doing them without guidance or help can double the pressure. So, make your filing as easy as possible beforehand. Prepare all your documents, leave time to spare, and research ahead of filing. You’ll set yourself up for a painless process that’s less likely to encourage any mistakes.