How to File Your Personal Income Taxes
- Income Tax Filing Deadlines
- Income Tax Filing Options
- Income Tax Payment Options
- IRS Income Tax Penalties, Late Fees, and Interest Charges
- How to Prepare Your Personal Income Tax Return
- Tax Preparation Tips
- Tax Preparation Checklists
- Free Tax Preparation
1. Income Tax Filing Deadlines
Personal Income Tax Due Dates
In general, personal income tax returns (i.e., IRS Tax Forms 1040, 1040A, and 1040EZ) are due by April 15th, following the end of that tax year. This means that your 2011 income tax return, for example, is due by April 17th 2012. In the case that a holiday falls on April 15th (as it does in 2012), the filing deadline is moved to the next business day.
State Tax Returns -- It's important to note that your State income tax return may or may not be due on the same date as your Federal (IRS) income tax return. Make sure to check with your state’s tax commissioner or department of revenue to confirm the filing deadline.
Estimated Income Tax Due Dates
If you owe estimated income tax during the year, you are required to make 4 payments in equal installments. Typically, these payments must be submitted every 4 months throughout the year. In 2012, these dates are January 17, April 17, June 15, and September 17. Estimated tax payments can be made using IRS Tax Form 1040-ES.
Business Income Tax Due Dates
Most businesses must file and pay their Federal taxes by the 15th day of the 3rd month following the close of their taxable year. This generally falls on March 15th, though it depends on each company’s particular schedule. Note that your business is most likely subject to Federal and State income taxes, and certain business-owners may need to include their business income on their personal tax return.
Extended Tax Deadlines
If you cannot file your tax return by the deadline, you may request an extension of time to file from the IRS (Tax Form 4868 for individuals or Tax Form 7004 for businesses). This will give you an additional 6 months to file your return, although it will not extend the deadline for any taxes that you owe. Applying for a tax extension is easy and fast, and the IRS does not even require you to provide a reason. While it’s not recommended that you get in the habit of filing late, it is an option that many taxpayers take advantage of each year.
Also note that in many states, you can be granted an automatic State tax extension if your Federal extension is approved. Be sure to check with your state’s tax commissioner or department of revenue for details regarding tax extensions.
2. Income Tax Filing Options
There are many different ways to prepare your income tax return. Whether you hire a professional or do it yourself, tax preparation can be relatively easy and stress-free if you make an effort to understand the process and your options.
Decide Which Filing Method Is Best for You
You typically have 3 tax filing options: paper filing, tax preparation software, or hiring a professional.
Paper Filing ― Even in today’s day and age of digital technology, many people still feel more secure preparing taxes with good old pen and paper. With paper filing, you are in charge of every detail from start to finish – but there is no immediate tax help available.
Tax Preparation Software ― Tax preparation software is becoming more and more popular for many reasons. Most tax preparation programs will be able to answer any questions you may have. Additionally, much of the software is built to help you take advantage of as many tax deductions and tax credits as possible.
Tax Professional ― When you hire a professional to prepare your federal income tax return, you are generally cutting out all of the “guesswork.” You can be confident that your return is accurate and that you are saving as much money as possible. The downside to this is that you will pass the control to the tax professional, and of course, you have to pay for this tax preparation service.
No matter what option you choose to prepare your taxes, one thing remains the same: you need to be organized and have the proper documents on hand.
Traditional Mail vs. Online Filing
Those who are filing a paper tax return will need to mail it to the IRS upon completion. On the other hand, if you are using tax preparation software or filing through a tax professional, electronic filing may be a better option. Tax returns that are submitted electronically are often processed faster, which means a faster tax refund for the taxpayer.
Filing Taxes Online
Filing taxes online is easier today than ever before. Believe it or not, approximately 100 million people electronically file their tax returns every year ― and this number is growing. Rather than opt for paper and pen the next time around, consider filing taxes online. Doing this can increase your efficiency and you probably find it easier to take full advantage of all tax credits and tax deductions.
If you want to file your taxes online consider the following options:
Tax Preparation Software
No matter how simple or complex your tax return is, you can use tax software to file taxes online. Most programs offer a free option for those who have a simple return and don’t need much income tax help. If you are willing to spend a few dollars, you can upgrade to an application that offers more features, such as audit protection and email assistance. Along with this, paying a little bit of extra money also puts you in a position to file your state taxes online.
IRS Free File Program
What better way to prepare and file your taxes than directly through a program sponsored by the IRS? For those with an adjusted gross income of $57,000 or less, the IRS offers free tax online preparation and e-filing. Those who qualify for this free program can also receive help with the preparation of their tax return. The program asks simple questions and then plugs your answers into the right parts of the form. With the math being done for you, this is a quick and simple process. What if I earn more than $57,000? The IRS will still take good care of you. You can take advantage of “Free File Fillable Forms.” With these, there are no income limitations or restrictions. The main difference is that you have to fill out the tax forms yourself as opposed to relying on the system for help.
Tax Professionals
In today’s day and age, a growing number of tax professionals are opting for electronic filing on behalf of their clients. To be sure, you can ask the tax professional if they file taxes online or by paper mail before you schedule an appointment. Depending on how complicated your financial situation is (and how well you understand the tax code), a professional accountant may be beneficial for you. An accountant will be well-versed in looking for the deductions that you are eligible for, as well as making sure that all tax forms are filled out correctly. Any mistakes or errors could result in a delay of your tax refund, or worse, a tax audit.
Tax Assistance Programs
For those who are eligible, the IRS offers Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE). Through these programs, many tax preparation resources are made available, including tax professionals who can help with the tax filing process as well as trained volunteers who are qualified to answer a variety of questions.
While there are many different ways to prepare your taxes, you should use whichever option you are most comfortable with. Utilizing some of the above tax preparation resources can help you maximize the amount your tax refund and minimize your confusion and stress.
3. Income Tax Payment Options
Individuals have many different options for paying their federal income taxes. You can pay electronically (online) with a credit card, debit card, or e-check (electronic check). Or you can pay your taxes by paper mail with a check, money order, or cashier’s check. Additionally, if you wish to pay in cash, there is an option for that as well.
Electronic Tax Payment Options
Electronic payment options give taxpayers the opportunity to pay their taxes online, as an alternative to sending in a check or money order. Online payments can be made 24 hours a day and 7 seven days a week. Additionally, these electronic payment options are safe, secure, and easy to use.
Individuals who are using IRS e-file to file their tax return can authorize a payment through Electronic Funds Withdrawal (EFW), use a debit or credit card, or enroll in the U.S. Treasury’s Electronic Federal Tax Payment System (EFTPS). Both the EFW and the EFTPS options are free of charge.
Tax Payments by Check, Money Order, or Cashier’s Check
If you are making a tax payment by check, money order, or cashier’s check, be sure that it’s made payable to the “United States Treasury” (or “U.S. Treasury”). Write your Social Security Number (or Employer Identification Number), the tax period, and the related tax form number on your check or money order. Finally, make sure to mail the payment to the correct address, as listed on your tax notice or tax form instructions.
Cash Payments for Tax
Note that cash payments can only be made in person at a local IRS Office -- do not send a cash payment for your taxes through the mail! You can check the IRS website for office locations throughout the country.
Late Tax Payments
Whether you are filing late and/or paying late, the IRS urges taxpayers to pay their bill in full. It is always recommended that you pay as much of what you owe as you can, and as soon as you can. The longer you wait, the more late fees and interest charges that can accrue.
According to the IRS, “If taxes are not paid, and no effort is made to pay them, the IRS can ask a taxpayer to take action to pay the taxes, such as selling or mortgaging any assets owned or getting a loan. If effort is still not made to pay the bill, or make other payment arrangements, the IRS could also take more serious enforced collection action, such as levying bank accounts, wages, or other income, or taking other assets. A Notice of Federal Tax Lien could be filed that may have a detrimental effect on a taxpayer’s credit standing.”
IRS Tax Payment Plans
If you cannot pay the full amount due with your income tax return, you can ask the IRS if they will allow you to make monthly installment payments for the full amount or a partial amount. However, keep in mind that you will be charged interest and also possibly a late payment penalty on the tax not paid by the date your return is due, even if your request to pay in installments is granted.
If your payment plan request is granted by the IRS, you must also pay a fee. To limit your interest and penalty charges, try to pay as much of the tax as possible with your tax return. But before requesting an installment agreement, you may want to consider other less costly alternatives, such as a bank loan.
To ask for an installment agreement, use Tax Form 9465, known as the Installment Agreement Request. You should receive a response to your request within 30 days. You can also apply online for a payment agreement. To do that, go to the IRS website and use the pull-down menu under “I need to . . .” and select “Set Up a Payment Plan.”
How an Installment Agreement Works
The IRS will usually let you know within 30 days after receiving your request whether it is approved or denied. However, if your request is for tax due on a return you filed after March 31, it may take longer than 30 days to reply. If The IRS approves your payment plan request, they will send you a notice detailing the terms of your agreement and requesting a fee of $105 (or $52 if you make your payments by electronic funds withdrawal). However, you may qualify to pay a reduced fee of $43 if your income is below a certain level. The IRS will let you know whether you are eligible for the reduced fee. If the IRS does not say you qualify for the reduced fee, you can request the reduced fee using Tax Form 13844 (Application for Reduced User Fee for Installment Agreements).
You will also be charged interest and possibly a late payment penalty on any tax not paid by its original due date, even if your request to pay in installments is granted. Interest and any applicable penalties will be charged until your balance is paid in full. To limit the interest and penalty charges, you will want to file your tax return on time and pay as much of the tax as possible with your return (or notice). All payments received will be applied to your account.
By approving your request, the IRS agrees to let you pay the tax you owe in monthly installments (instead of immediately paying the amount in full). In return, you are agreeing to make your monthly payments on time. You are also agreeing to meet all your future tax liabilities. This means that you must have enough withholding or estimated tax payments so that your income tax liability for future years is paid in-full when you timely file your return. Your request for an installment agreement will be denied if all required tax returns have not been filed. Any tax refund due you in a future year will be applied against the amount you owe. If your tax refund is applied to your balance, you are still required to make your regular monthly installment payment.
Making a Payment with Your Tax Extension
Before you complete your tax extension request, remember this important fact: a tax extension gives you more time to file your income tax return (e.g., Tax Form 1040), but it does not give you more time to pay any tax that you owe to the IRS. So, if on April 15 (or April 17 for the 2012 tax filing season) you owe the IRS money, you are expected to pay that full amount or else you may be subject to penalties and late fees.
There are several ways to make payments with your tax extension. Here is a summary of the main payment options:
Electronic Funds Withdrawal (EFW) Payment
If you e-file taxes online, using your personal computer or through a tax extension professional (like FileLater), you can make a payment by authorizing an Electronic Funds Withdrawal (EFW) directly from your bank account. Make sure to check with your financial institution to confirm that an electronic funds withdrawal is allowed, and to obtain the correct routing and account numbers. If you owe income tax and wish to have the money electronically withdrawn from your bank account, you will be asked to agree to the following declaration:
"I authorize the U.S. Treasury and its designated Financial Agent to initiate an ACH electronic funds withdrawal entry to the financial institution account indicated for payment of my federal taxes and the financial institution to debit the entry to this account. To revoke a payment, I must contact the U.S. Treasury Financial Agent at 1-888-353-4537 no later than 2 business days prior to the payment (settlement) date. I also authorize the financial institutions involved in the processing of the electronic payment of taxes to receive confidential information necessary to answer inquiries and resolve issues related to the payment."
The EFW payment option allows taxpayers to e-file their 4868 Form online and simultaneously “e-pay” the tax that they owe. You will receive a written copy of the EFW payment authorization once you complete the transaction. It is important to keep this for your records. If you e-file your tax extension, do not send in a paper Form 4868.
Credit Card Tax Payment
You can apply for a tax extension by paying (part or all of) your income tax by credit card. To pay using a credit card, you will need to go through an IRS-approved service provider ― Link2Gov Corporation, RBS WorldPay, or Official Payments Corporation. Phone numbers and sites for the service providers are available on the IRS website.
You can use your American Express®, Discover®, MasterCard®, or Visa® credit card. A convenience fee will be charged by the service provider based on the amount you are paying. Note that fees may vary among the providers. You will be told what the fee is during the payment process, and you will have the option to either continue or cancel the transaction. You can also find out the fee amount be by calling the service provider's customer service number or by visiting their website. Do not add the convenience fee onto your tax payment.
When you make a tax extension payment by credit card, you will receive a confirmation number. Make sure to save this number for your records.
Tax Payment by Check or Money Order
When paying by check or money order, mail your payment with Tax Form 4868 to the appropriate address (listed on the Instructions for Form 4868). Make your check or money order payable to the "United States Treasury" and DO NOT SEND CASH. Also don’t forget to write your Social Security Number, daytime phone number, and the words "2010 Form 4868" on your check or money order. Do not staple or attach your payment to Tax Form 4868. Additionally, if you e-file Form 4868 online and mail a check or money order to the IRS for tax payment, use a completed paper Form 4868 as a payment voucher.
4. IRS Income Tax Payment Penalties, Late Fees, and Interest Charges
If you don't pay your income taxes by April 17th and (or your business taxes by March), the IRS will most likely assess a late payment penalty and interest charges which accumulate each month that your taxes go unpaid.
The “late payment penalty” is usually 0.5% of the unpaid taxes, assessed on a monthly basis. For example, if you have $2,000.00 in unpaid taxes, the IRS may charge you $10.00 per month as a late payment penalty: $2,000.00 x 0.5% = $10.00
If you haven't paid your balance by the time your tax return is due, you will begin to accumulate “interest charges” on your outstanding balance. This interest is typically assessed at 5.0% annually on your balance.
For example: If you filed a tax extension but did not pay the taxes due, you will be charged 5.0% interest annually (or 0.4% interest monthly) on your outstanding balance. Using numbers from the example above, let’s assume $10.00 per month in late payment penalties. Add to that your monthly interest charge of 0.4%, which is about $8.00 per month in interest: $2,000.00 x 0.4% = $8.00
Tax Extensions and Payments
Filing a tax extension gives you six extra months to file your tax return ― but if you owe taxes, the IRS requires that you still pay by the original due date (April for individuals, March for businesses).
A tax extension gives you the time you need to prepare a completely accurate tax return, but the IRS will not wait six months to receive the taxes you owe. If your tax return comes out better than you had expected, you will get a tax refund. If it comes out worse, you will have to pay the additional amount to the IRS. Despite what you may (or may not) owe, you are still required to pay by April 17th (for the 2012 individual filing season).
The Costs of Tax Preparation
The costs associated with professional tax preparation can be considerable. But, beyond the obvious advantage of having your accountant point out the various tax credits and tax deductions you are eligible for. Plus, you may have the additional benefit of being able to deduct the tax preparation fees themselves.
You can use Schedule A to deduct the costs of your tax preparation for income tax purposes. If these tax preparation costs are related to a farm operation, use Schedule F to deduct them. If they are related to rental or royalty income, use Schedule E, and if they are part of a self-employed business, use Schedule C.
So, what are these tax-deductible fees? You can deduct the mileage you drove to meet with your accountant for tax preparation purposes. You can also deduct the postage you paid to mail your tax information to your accountant, as well as the postage you pay to mail your return to the IRS and state agencies. Buying a book in order to understand the new tax regulations for this year? You can deduct the cost of that too.
Even electronic tax preparation programs, with no accountant involved, can be tax-deductible. You can deduct the fee you paid to e-file your return online, as well as the cost of the software you purchased to prepare your tax return.
Keep in mind, however, that tax preparation fees are a miscellaneous tax deduction, and your miscellaneous deductions must exceed 2% of your adjusted gross income (AGI) before they start counting against your income for tax purposes.
Are these tax preparation fees worth it? It depends on whether you feel that getting help on your tax preparation, whether from a trusted accountant or an online service, will give you enough of a tax advantage. In many cases, getting the extra tax preparation help can lead to tax credits you didn’t know you qualified for or finding ways to offset your capital gains tax. For a lot of people, this makes the cost of professional tax preparation worthwhile.
Even if you do your taxes by yourself, the old-fashioned way, by getting tax forms from the library and filling them out by hand, you will still have to pay the cost of postage. Therefore, you might as well calculate this cost and include it in your miscellaneous tax deductions. Unless, that is, you use the IRS’s free online e-filing tool. Your income needs to be under $57,000 to qualify for the free tax preparation service, but taxpayers at any income level can use the e-filing program, which aims to cut down on bureaucratic paperwork.
5. How to Prepare Your Personal Income Tax Return
If you understand how to prepare your federal income tax return there is nothing intimidating about the process. Although you may run into some details that you’re unsure of, there is always a way to find the right answer.
Have you had issues with tax preparation in the past? If so, the following suggestions will be useful:
Gather the appropriate documents. Preparing a tax return is much less stressful when you are organized and have all the proper paperwork laid out in front of you. In general, this includes income statements (W-2 and 1099 tax forms) as well as receipts for tax deductions and contributions.
Decide which filing method is best for you. You typically have 3 tax filing options: paper filing, tax preparation software, or hiring a professional.
Even in today’s day and age of digital technology, many people still feel more secure preparing taxes with good old pen and paper. With paper filing, you are in charge of every detail from start to finish – but there is no immediate help available.
Tax preparation software is becoming more and more popular for many reasons. Most tax preparation programs will be able to answer any questions you may have. Additionally, much of the software is built to help you take advantage of as many tax deductions and tax credits as possible.
When you hire a professional to prepare your federal income tax return, you are generally cutting out all of the “guesswork.” You can be confident that your return is accurate and that you are saving as much money as possible. The downside to this is that you will pass the control to the tax professional, and of course, you have to pay for this tax preparation service.
No matter what option you choose to prepare your taxes, one thing remains the same: you need to be organized and have the proper documents on hand.
Take your time. If you are filing a paper return or using tax preparation software, you are responsible for moving from one line to the next in a calculated manner. A professional who has been preparing taxes for many years may be able to move along quickly without making a single mistake. But since you only file once a year, you will want to be much more cautious.
Mail or e-file? Those who are filing a paper tax return will need to mail it to the IRS upon completion. On the other hand, if you are using tax preparation software or filing through a tax professional, e-file may be a better option. Tax returns that are submitted electronically are often processed faster, which means a faster tax refund for you.
Tax preparation can be simple and stress-free if you make an effort to understand the process and your options. Avoid common tax return mistakes by taking the time to double (and even triple) check your work.
How to File Your Income Tax Return
If you are a United States citizen you will need to file a federal income tax return every year to determine how much you owe in federal income tax. Although many people are intimidated by the thought of filing their tax return, there is no reason to panic each April. Income tax filing is a process that millions of people complete successfully every year.
Below are some important steps you should take to file your federal income tax return:
1. Find out if you are required to file a federal income tax return
While the majority of people are required to file and pay income taxes, there are certain low-income earners (as well as children) who are exempt. You will most likely have to file an income tax return, but you should check the IRS’ filing requirements before you proceed.
2. Determine your tax filing status
The federal tax filing statuses include: single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with dependent child. You may qualify for more than one filing status, in which case you will have to make a choice. In that situation, you should choose the filing status that will result in the lowest tax.
3. Calculate your dependents and personal exemptions
The IRS allows taxpayers to claim personal exemptions for themselves and their dependents. A personal exemption is similar to a tax deduction because it reduces your taxable income. For tax year 2011, the maximum personal exemption is $3,700 ― note that your personal exemption amount may be less if your income exceeds a certain amount. Your personal exemption information must be 100% accurate on your tax return because it largely impacts how much federal income tax you owe.
4. Report your income for the tax year
Most people can simply review their W-2s (Wage and Tax Statements) to determine their annual income. This can get slightly more complicated if you have worked more than one job during the year. Furthermore, individuals who are self-employed will likely have to spend extra time on this part of the filing process.
5. Claim eligible tax credits and deductions
If you qualify for any tax credits or tax deductions, you will want to take advantage of them. Tax deductions reduce your taxable income and tax credits reduce the actual amount of tax that you owe ― both will increase your chance of receiving a tax refund. Make sure you understand how to properly claim any income tax benefits, as mistakes will delay the processing of your return.
If you are preparing your own income tax return, you may order IRS tax forms (and publications) for delivery by U.S. mail or you can access the forms online. All of the documents that you will need to file your federal income tax return should be available on the IRS website.
Federal Income Tax Forms
There are different types of individual income tax return forms. You must use the tax form that corresponds with your particular situation and allows you to claim the income, deductions, credits, etc. that apply to you. The most common types of income tax returns include the following:
• Form 1040 (U.S. Individual Income Tax Return) (a.k.a. “the long form)
• Form 1040A (U.S. Individual Income Tax Return) (a.k.a. “the short form)
• Form 1040EZ (Income Tax Return for Single and Joint Filers With No Dependents)
• Form 1040NR (U.S. Nonresident Alien Income Tax Return)
• Form 1040NR-EZ (U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents)
If preparing your own taxes is too overwhelming, or you just don’t have the time, consider hiring an experienced tax professional. If you have a complicated tax return or you have questions about claiming certain tax credits/deductions, using a tax preparer can help make the filing process less painful.
Before you begin filing your personal income tax return, make sure you have the following information ready:
- Proof of identification
- Filing status and residency status
- Social Security Numbers for you, your spouse, and any dependents
- Dates of birth for you, your spouse, and any dependents
- A copy of your past tax return
- Statements of wages earned (e.g., W-2, W-2G, 1099-R, etc.)
- Statements of interest/dividends from banks, brokerages, etc.
- Proof of any tax credits, tax deductions, or exclusions
- Your bank account number and routing number (for Direct Deposit)
6. Tax Preparation Tips
When it comes to tax preparation many people are far from efficient. In fact, most taxpayers are disorganized and unprepared when they begin to file their returns. Of course, you don’t have to make this mistake.
The following 5 tax preparation tips can benefit you in a number of ways:
1. Get organized with the help of a checklist.
If you use a tax preparation checklist, you’ll know for sure that you have all the right documents ready and that you won’t miss a single detail. A tax preparation checklist is the best way to stay organized because you can physically see what you have already done, as well as what needs to be completed in the future.
2. Get tax help if need be.
You can find tax help in a couple of different ways. Many people use tax preparation software because it helps them stay organized, maximize tax deductions and tax credits, and file electronically. If you are looking for one-on-one tax preparation assistance, consider hiring a tax professional.
3. Triple check your work.
Do not be tempted to send off your tax return until you review it at least three times. This will help to ensure accuracy while allowing you to feel confident in the decisions that you’ve made. Make sure that all your personal information is correct, especially Social Security numbers. Any mistakes on your tax return will lead to slower IRS processing, which means a longer wait for your tax refund.
4. Tax preparation does not start the day that you want to file your tax return.
If you want to be fully prepared, you need to think about your tax situation throughout the year. Those who wait until April to organize their finances are putting themselves in a vulnerable position. Even if the next deadline is months away, you should still do what you can to stay organized NOW to avoid potential problems in the future.
5. Give yourself enough time by knowing your deadlines.
This goes along with tax preparation tip #4 above. If you know the deadlines that you must adhere to, it becomes much easier to be prepared for anything that comes your way. Some people only need to be aware of one deadline: April 15th (or April 17th in 2012). Others will need to remember several deadlines, such as those who owe local/state taxes and make quarterly estimated tax payments.
Almost everyone should be able to take advantage of these 5 tax preparation tips. Overall, you must be willing to do whatever it takes to successfully prepare and file your tax return. The closer you follow these tax preparation tips, the better chance you have of avoiding costly mistakes.
7. Tax Preparation Checklists
Before you prepare your tax return you should have a tax preparation checklist to help you get organized. Along with this, your tax preparation checklist should also get you in the right frame of mind. Once you are organized and ready to move forward, you will find that everything begins to fall into place.
What is the overall goal of a tax preparation checklist? Simply put, it will help you get everything together before you begin to file your tax return or show up for your appointment with a tax professional. As you move down the checklist, you will find items you may have missed as well as things that were accounted for in the past.
Listed below are some of the details that should be included on your tax preparation checklist.
Tax Preparation Checklist for Personal Information
The IRS needs to know who is filing the tax return, as well as how many people are covered on it. To make this easy, they require:
- Your Social Security number
- Your spouse’s Social Security number (if married)
- Social Security numbers for any dependents
Tax Preparation Checklist for Income Information
The following documents will help you prepare all the income information that you need to file a federal tax return:
- W-2 Forms from all employers you (and your spouse, if filing a joint return) worked for during the past tax year.
- 1099 Forms if you (or your spouse) completed contract work and earned more than $600.
- Investment income information (including: interest income, dividend income, proceeds from the sale of bonds or stocks, and income from foreign investments).
- Income from local and state tax refunds from the prior year.
- Business income (accounting records for any business that you own)
- Unemployment income
- Rental property income
- Social Security benefits
- Miscellaneous income (including: jury duty, lottery and gambling winnings, Form 1099-MISC for prizes and awards, and Form 1099-MSA for distributions from medical savings accounts).
Tax Preparation for Income Adjustments
The following adjustments can help reduce how much you owe in taxes, and in turn, increase your chance of receiving a tax refund:
- Homebuyer tax credit
- Green energy credits
- IRA contributions
- Mortgage interest
- Student loan interest
- Medical Savings Account (MSA) contributions
- Self-employed health insurance
- Moving expenses
Tax Preparation for Credits and Deductions
There are many tax credits and tax deductions for various expenses, which are designed to help lower the amount of tax that an individual has to pay:
- Education costs
- Childcare costs
- Adoption costs
- Charitable contributions/donations
- Casualty and theft losses
- Qualified business expenses
- Medical expenses
- Job and moving expenses
Tax Preparation Checklist for Direct Deposit
Are you interested in having your tax refund directly deposited into your bank account? If so, you will need to provide two things:
- Your bank account number
- The bank’s routing number
These tax preparation checklists should help you get organized before filing your next income tax return.
8. Free Tax Preparation
Are you interested in free tax preparation? Who isn’t?! A lot of people do not want to spend money preparing their taxes because they have no idea how much they will owe the IRS.
If free tax preparation is something that you want to take advantage of, there are many options you should consider.
“Free File” from the IRS
The IRS has this to say about their program:
“Free File is the fast, easy, and free way to prepare and e-file your federal taxes online.”
With the IRS Free File option, there are some things you have to keep in mind. For instance, you must earn less than $57,000 during the tax year to be able to use this tax preparation software and the free step-by-step help that it offers. That being said, if your income exceeds $57,000, you can usually still file for free by filling out your tax forms online without software.
Free Tax Preparation by Volunteers
The IRS has two programs for those looking for free tax help:
- Tax Counseling for the Elderly (TCE)
- IRS Volunteer Income Tax Assistance (VITA)
In order to take advantage of these tax assistance programs, there are some specific stipulations and requirements that you must meet.
Free Tax Preparation Software
Why pay for tax preparation software when there are so many free programs available? If you want to save money but still take advantage of what tax preparation software has to offer, find a free online tool. With this, you can get free help for your tax return and then e-file with ease and efficiency.
Do It Yourself
When it comes to free tax preparation there is no cheaper option than tackling your tax return without any outside help. Since you are doing all the work yourself, you do not have to part with a single penny. The only downfall is that you are going to be on your own from start to finish. Just make sure that you are equipped with the necessary knowledge to file an accurate return.
As you can see, there are many methods of free tax preparation to consider. You can use one of the programs offered by the IRS or you can turn to free tax preparation software. If all else fails, you can always learn how to prepare and file taxes for yourself.
Make sure you consider the above methods of free tax preparation before you unnecessarily part with any money. You may find all the help you need – plus much more!
