Filing Your Own Taxes: A Primer

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tax
1040X individual income tax return form with calculator and pen

Filing your own taxes may seem complex or even scary. But if you are like most taxpayers in terms of income sources and deductions, doing your own taxes is actually not that difficult. This is why every year, according to the Pew Research Center, a third of Americans do their own taxes.

In this article, we will provide you with easy-to-follow guidelines for filing your own tax returns.

1. Find Out If You Need To File Tax Returns

The first thing you should do is determine if you actually need to file tax returns. Because of changes in tax laws in recent years, many income earners do not need to file them. Discovering whether you need to file returns is easy. The IRS offers what it calls an Interactive Tax Assistant, which will tell you in a few minutes if you need to file returns.

2. Use Tax Preparation Software

Many taxpayers opt to use a tax preparer to file their taxes because they think that it takes the complexity out of preparing their taxes. The preparer asks you a set of questions, and from your answers and the documents you provide, they take care of everything. But using tax preparation software is just as easy and a lot cheaper. In some cases, it is even free.

The best brands of tax preparation software, such as TaxSlayer, guide you through the entire filing process just like a preparer does. Using this kind of software is as easy as filling out a questionnaire, and even if you have to pay a small fee to use it, products like TaxSlayer let you deduct this from the refund that it will generate for you.

3. Prepare Everything You Will Need Well Ahead of Time

You probably have heard the old saying: “people do not plan to fail; they fail to plan.” There is a good reason why this saying is so old. There is a lot of truth in it.

Do not wait until the last minute to do your taxes. Start as soon as you have collected all the financial documents from both your employer and the financial institutions in which you have an account.

The first thing you should do afterward is determine what returns you need to file and when you need to file them. This includes state returns, if applicable. Then, gather your previous year’s tax returns. This will provide you with most, if not all, of the IDs and account numbers that you will need to fill out this year’s returns.

4. Decide Whether You Will Itemize Deductions

When doing your own tax returns, one of the biggest decisions that you will have to make is deciding whether to itemize. The IRS gives you the option of either taking the standard deduction or taking a deduction for all the tax-deductible expenses that you have accumulated over the year. This can include:

  • Mortgage interest
  • Property taxes
  • Charitable deductions

If the amount of your combined expenses exceeds the standard deduction, you should itemize. If you use tax preparation software, it will help you make this calculation.

5. Fill Out Your Returns and Carefully Check Them

Once you have all your tax information ready and know exactly how you will approach your tax returns, filling them out is relatively simple, especially if you use tax preparation software. Your returns will practically fill themselves out. But you are still not done. You should double-check your returns before you file them, no matter how you prepared them. If possible, also have someone you trust look at them, too, just to make sure that you did not make an obvious mistake.

6. File Your Returns on Time

The final guideline is to file your returns on time. You should do this even if you owe money that you cannot pay. This is because if you do not file your returns on time, you will be subject to a late filing fee. Always remember that, if you cannot pay your taxes right away, you can apply for an installment agreement with the IRS.