Tax season is upon us, and getting them filed on time is crucial. The 2023 tax filing season opened on Monday, January 24th this year. If you’re considering doing your taxes on your own, keep in mind that federal income tax can be tricky. However, having a solid guide to follow is key to ensuring that your taxes are completed correctly. Any errors you make can result in fines and prevent you from earning the largest possible return.
At first sight, going it on your own can appear daunting. Most individuals find filing taxes to be intimidating, especially preparing and submitting them alone. Fortunately, this does not have to be the case! It can be a lot easier if you understand the fundamentals. This article will help you know what is essential and how to file your taxes on your own.
Before you file your taxes, there are three vital steps:
Step One – Gather Your Paperwork
Before you begin completing your taxes on your own, you should gather all necessary information and documents. Collecting this information before starting the process saves a lot of time. Instead of intermittently pausing to find another document, you’ll have everything you need ready to go. So get all of your paperwork readily available in front of you.
Here are some of the documents that you should have ready. Be aware that this is not a complete list of all the paperwork you may need. Consider your specific income circumstances to decide what else you’ll need to submit in your forms. For example, you will also need the social security numbers of dependants if you have any.
- W-2s – Employers have until January 31st to mail you their w2. However, if you moved in the last year, you may not receive it. Make sure your employer has your current address on file.
- 1099s – If you are an independent contractor, you will get a form 1099 rather than a w2.
- Interest statements – If you own a home, you must declare any mortgage interest paid. This is only necessary if you have paid out $600 or more in interest.
- Deductible expense receipts – If you own your own business, you may be able to deduct some of your expenditures from your revenue. You will need any receipts from purchases made for the business.
Step Two – Determine Your Filing Status
Correctly establishing your filing status is an integral part of your tax preparation. Your tax burden can vary depending on your filing status. Be sure to assess your filing status according to IRS requirements. In most situations, determining which status to claim is clear-cut. There are five filing statuses to choose from:
- Single – not married or you’ve been divorced
- Married filing jointly – married and filing your return together
- Married filing separately – married but filing a separate return
- Head of household – unmarried and have at least one dependant
- Widow or Widower with Dependents – your spouse passed away, and you have at least one dependant
Step Three – Find Tax Deductions and Credits
To file your taxes on your own, you must first understand what deductions and credits you are entitled to. You could end up overpaying the IRS if you are unaware of certain deductions and credits. You can easily look up a list of possible deductions/credits on the IRS site and determine which ones may apply to you. Some common ones include:
- Childcare expenses
- Unearned Income Credit
- Charitable contributions
- Higher education credits
- Child Tax Credit
- Health Expenses
- Mortgage Interest
- American Opportunity Tax Credit
Filing Your Taxes
Once you’ve collected paperwork, determined your filing status, and found possible credits, it is time to file your taxes on your own. There are three options. Each solution provides a somewhat different approach to preparation, but the fundamentals are the same. Choose the one that best fits your lifestyle and tax situation.
Filing manually – You can go the old-school route and file manually. The needed forms can easily be downloaded from the IRS website and are free. You can finish these by hand and mail them in. In most cases, completing your taxes manually is only a good idea if you have an uncomplicated tax situation. Although these paper forms allow you to go through a more detailed financial picture, it can get tedious and time-consuming. Be sure to pay attention to detail in this process. It will most likely take several hours to finish, so ensure you set aside a reasonable amount of time.
Filing online with the IRS – On its e-File site, the IRS provides free fillable forms. You’ll get step-by-step instructions to help you fill out the form. E-Filing is also a quicker way to get your information to the IRS rather than waiting for the US mail system. However, while this way of filing can be easier than filing manually, it will still take some time.
Filing with Online Tax Software – The easiest (and certainly the most popular way) to file taxes on your own is by using online tax software programs. Although you may have to pay to utilize an online software tool, it may be worthwhile if you have a complicated tax situation. This option also allows you to eFile rather than use mail. A significant benefit to filing this way is that you are unlikely to miss any credits or deductions and less likely to make mistakes. Most online tax software offers free preparation and filing with upgrade options. Some popular online software programs include:
- Cash App Taxes
- TurboTax
- H&R Block
- TaxAct
- FreeTaxUSA
- TaxSlayer
Filing On Your Own Versus Hiring a Professional
Now that you have a better idea of what you are in for, let’s look at the alternative. If you have a complicated tax situation, consider hiring a tax specialist. For example, if you have a complex issue involving several W-2s, 1099s, you own a business, or have an estate, using a tax professional may be a better route.
Professional accountants are well-versed in the tax code. Therefore, they can ensure you don’t miss out on any savings you are entitled to. Another good reason to hire a tax pro rather than file on your own is time. If you don’t have the time to devote to the process, you may want to hire an expert.
While tax preparation might be time-consuming and a little unpleasant, it is doable to file them on your own. It may not be as frightening as you think and can be a very rewarding experience. In addition, it can save you some money and make you feel more in charge of your finances.
