I Want to Do My Taxes
Sometimes you just want someone to tell you what to do—you know, like how to lose weight … and how to get your taxes done, so you don’t have to think about them for 365 more days.
Lucky for you, we’re more than happy to oblige by offering up this handy, eight-point checklist!
Gather your paperwork.
Here’s a short list of what you need before you can begin your taxes:
- Your Social Security number, as well as those of your spouse and dependents
- Your bank account and routing numbers
- A list of taxes you’ve paid so far this year, including property taxes, state and local taxes and any estimated taxes that you’ve made
- Income tax forms, such as W-2s, 1099s, Schedule K-1s and any other records showing income
- IRA contribution or distribution information
- Payments you’ve made toward education, such as tuition or student loan interest paid
- Child-care costs detailed in canceled checks or invoices, as well as the child-care provider’s name, address and tax ID or Social Security number
- Home mortgage interest paid and home improvement expenses
- Expenses related to a job search or moving
- A list of charitable donations
- Records of medical expenses
Decide if you need an accountant.
On the one hand, you could save money by not paying an accountant. But if you miss a crucial credit or deduction. you could end up paying thousands more than necessary.
Some people can actually knock their taxes out in an afternoon with good tax-filing software, plus the help of a great resource like, say, our free Ace Your Taxes Bootcamp and helpful tax articles. Here are some situations in which you might consider getting an accountant:
- You’re itemizing your deductions
- If you’re part of a business partnership, own your own business, are self-employed or freelance
- You’ve undergone some big life changes in the past year (or plan to this year)—like having a child or selling a home
- You bought or sold a lot of investments in the past year
- You worked or lived abroad
If you’re planning to use an accountant, call him or her as soon as possible to get a better rate and ensure that you can actually find an accountant who’s not fully booked up. Once you find an accountant and drop your documents off with them, you’re done with this checklist! But if you’re doing your taxes yourself, read on.
Pick tax-filing software.
If you aren’t using an accountant, we still recommend signing up for tax-filing software. Yes, it costs money, but much less than an accountant. And it really makes tax filing easier and more intuitive.
Here are some popular tax-filing software options:
If you don’t want to pay for tax-filing software, you could still e-file (preferable to paper filing) for free. Those who have an Adjusted Gross Income (AGI ) under $57,000 can use what the IRS calls Free File. If your AGI is over $57,000, you can use free fillable forms. which are electronic versions of the I.R.S.’s paper forms. There are some instances in which you’ll have to file by paper, including if you’re married but filing a separate return, you live in a community property state , you’re claiming a dependent who’s already been claimed by someone else or you are filing forms that require paper documentation.
Decide your filing status.
Your filing status is crucial to know because it determines which (and how many) tax breaks you can take. It’s determined by your marital status, whether you have dependents and some other factors. These are the five types:
- Single individual (unmarried with no dependents)
- Married person filing jointly (married, filing taxes together)
- Married person filing separately (married, but filing separate tax returns)
- Head of household (unmarried, have cared for a dependent more than half the year and paid more than half the cost of maintaining a home)
- Qualifying widow(er) with dependent child (used in the two years after your spouse dies, as long as you did not remarry and you have a dependent child)
If you’re unsure which one
applies to you, use our filing status flowchart .
Decide if you’re itemizing your taxes.
Your final tax bill is largely determined by your deduction(s). A deduction subtracts from your income, so that you aren’t taxed on your entire income, and hence get a smaller tax bill. Here’s a simplified example: If you have an income of $60,000 and you have a deduction of $5,000, then you pay taxes on just $55,000 of income. If you were in the 15% tax bracket, that deduction of $5,000 could save you about $750.
As a taxpayer, you have a choice between taking a standard deduction or listing all of your individual deductions and taking the sum total as your deduction. The latter option is called itemizing. It’s more work and requires more math and documentation, but it could end up saving you a lot of money.
The standard deduction for the 2012 tax year is $5,950 for individuals, $11,900 for married filing jointly or qualifying widowers with a dependent child, and $8,700 for those taking the head-of-household status. If your itemized deductions add up to more than your standard deduction, you should itemize.
As a rule of thumb, if you are paying interest on a mortgage, you have medical expenses that are more than 7.5% of your income, you pay a lot in state and local taxes or you have a lot of self-employed or small business expenses, it would probably be a good idea to itemize.
Get all of your exemptions.
Exemptions work in a similar way to deductions by reducing the amount of taxable income. For each exemption that you take for 2012, you can deduct $3,800 from your gross income to arrive at your taxable income. If you fall in the 10% tax bracket, that could translate to $380 less in taxes.
You are allowed to take exemptions for:
- Yourself (“personal” exemption)
- Your spouse
- Each dependent
So if you are married with three qualifying children, you can deduct $19,000 in exemptions ($3,800 x 5 = $19,000). Not bad, right? It’s a pretty easy portion of your forms to fill out, but—of course—there are some exceptions, like if you are divorced with kids. Read up on exemptions .
Get all of your credits.
Unlike deductions and exemptions, which lower the amount of income you are taxed on, credits directly reduce the amount of taxes you owe. So if you receive a $1,000 credit, that means you will pay $1,000 less in taxes.
You could claim a credit if you:
- Have a low income
- Made energy-efficient improvements to your home
- Bought an electric, plug-in car
- Are paying for college for yourself, a child or a spouse
- You paid for care for your child
If any of these sound like they might apply to you, read more about these credits .
If you’ll miss the deadline, ask for an extension.
The deadline for filing in 2013 for the 2012 tax year is April 15th. You can get extra time to file without filing for an extension if you are:
- Living outside the United States. Read more.
- Serving in a combat zone or a qualified hazardous duty area. Read more.
If those don’t apply to you, then you can file for an extension, which will be automatically granted. But this extension only applies to the paperwork—you must still pay what you estimate that you owe. If you have time to file the paperwork, but don’t quite have the funds to pay, read this article for your options.
Fill out as much of your 1040 as you can to estimate your taxes. You’ll use that figure to fill out Form 4868. which you can electronically file with your tax preparer or your tax software program, or send to the I.R.S. by mail. Then pay your estimated taxes using a credit or debit card. You can do this online or by phone. and you must pay at least $1.
And make sure to file before October 15th, 2013, if you’ve gotten the extension!Source: www.learnvest.com