Filing Your Taxes
How to Simplify the Yearly Burdens of Tax Filing
Filing taxes isn't exactly the best way to start the year. Nevertheless, you'll have to pay your dues to Uncle Sam if you don't want to get in trouble with the IRS. Fortunately, tax filing can be distilled down to the very basics and made simple that it becomes a mere routine with minimal stress and frustration. Here's a guide on how to file taxes properly.
The Internal Revenue Service is all about paperwork. Expect a W-2 form around late January or early February from your employer/s. W-2 contains information about your gross income alongside the amounts withheld from your federal, state, Social Security, and Medicare payroll taxes.
For self-employed contractors, you'll be receiving a 1099-MISC form from your employer. For a 1099-MISC form, no taxes are withheld hence requiring you to figure out for yourself how much of your income taxes are due. Take the time to identify all tax-deductible expenses you incurred during the year.
Determine How to File
Thanks to technological improvements, specifically in the web, people can now file online taxes. Every year, more and more taxpayers choose to use software programs to complete their income tax returns. Inexperienced taxpayers, however, may be more comfortable working with personal assistance, either from an accounting firm or tax preparer.
Although online tax filing is now accessible, taxpayers should still practice due diligence when finding a preparer. Take the time to evaluate the software program or the tax preparation firm you are considering of hiring. Being unaware and inexperienced can make you an easy target for many con artists who are out to get sensitive information from you, such as your SSN and bank accounts.
Inexperienced taxpayers should maximize deductions every year. It's free money and you don't want to leave it on the table. Commonly overlooked deductions include state and local sales taxes, charitable contributions that are paid via onetime or regular salary deductions, job hunting expenses, etc.
Employment benefits can also be counted as tax deductibles. Contribute to your employer's 401(k) plan or other retirement programs wherein employee contributions are treated pre-tax. Other examples of tax-deferred workplace benefits you should check for include flexible spending accounts and health savings accounts.
Balance Your Time
Don't be in a hurry to finish off your yearly taxes in a day. Although, respect the fact that there is a tax deadline imposed by the IRS. Have all the relevant files and supporting documentation to file taxes accurately. Ask the IRS for more time if need be.
To do so, complete and submit a Form 4868, which extends your tax timeline for six more months. By mid-October, you must finish filing your taxes otherwise you may incur fees.
Beware of Scams
One way your attempt to simplify tax filing can backfire and turn into a nightmare is if you get scammed. The IRS has seen an alarming increase in tax-related phone and email scams. Any inexperienced taxpayer who is gullible enough to submit his/her personal information to well-rehearsed con artists can see their financial future slipping away into the abyss.
To protect yourself from such scams, know what the IRS won't do. This includes calling about cash owed to them without first mailing you a bill, demanding the said cash owed to be paid immediately through phone, and asking for bank accounts and credit card details.
Filing taxes can be a hassle-free and money-saving process if done correctly. The key is to gradually accumulate and organize your documents throughout the year so that it's readily available when the time comes you'll need to file.