It's time to do those US Taxes. For those in America, it can be a daunting prospect, but with our tips, it should be a lot easier.
Tax season is here again, and for most taxpayers, the US taxes deadline for 2020 tax returns is April 15th, 2021.
This is also known as IRS Tax Day! You can file your taxes as early as January 2021, as soon as your employer gives you your W-2.
What Are Tax Returns?
In the USA, most people are paying income tax through their jobs every month. The amount of tax is calculated automatically based on your income and your State’s tax rate.
However, depending on your marital status, dependents, children, and potential other income, the automatic calculation may not be accurate.
If you purchased property, made investments, or even won the lottery, you may be getting money or paying missing taxes on Tax Day.
What do You Need to Do Your US Taxes?
The personal tax documents that you need to do your IRS tax returns include:
- Your social security number or tax ID number.
- If you are married, you’ll need your spouse’s full name, social security number or tax ID number, and date of birth.
- If applicable, information about your stimulus payment — also known as an economic impact payment (EIP).
- Identity Protection PIN, if one has been issued to you, your spouse, or your dependent by the IRS.
- Routing and account numbers to receive your refund by direct deposit or pay your balance due if you choose.
If you have dependents you will need:
- Birth dates and social security numbers or tax ID numbers.
- If applicable, childcare records.
- Any income of dependents and of other adults in your home.
- If applicable, Form 8332 showing that the child’s custodial parent is releasing their right to claim a child to you, the non-custodial parent.
You will also need evidence of your income. For most regularly employed people, this will be the W-2 form provided by your employer.
However, if you are unemployed, self-employed, are a landlord, are retired, etc., there are other forms that you need. Find the full list here.
If you bought property or a vehicle, you would also need to provide the paperwork associated with the purchase and taxes.
How to Do Your Taxes By Yourself?
There are several ways to do your US taxes. One of the easiest but most costly options is to hire a CPA. Hiring a Certified Public Accountant to do your taxes for you can cost between $200 and $500 per hour unless you manage to agree on a set price.
Keep in mind that it can take a lot of time to communicate all your information, especially if your situation isn’t cut-and-dry.
Most have a filing fee, and if you need help, some have the option of paying more to get virtual guidance from an expert.
TurboTax, for example, has several price options for its services. Filing 1040 is entirely free; however, this didn’t apply to me personally.
The base price for regularly employed people is $60. To cover stocks, you need to pay $90. If you have self-employment income, you’ll pay the highest cost of $120.
Do it By Hand
You can also fill out all the forms manually and by hand, and mail everything to the IRS. This is a little more complicated, especially if you have multiple forms of income. Plus, if you don’t use a computer program, you may not notice any existing errors.
Avoiding mistakes is crucial as it can save you a lot of money. Plus, if you make a mistake that gives you a greater return, you could get in trouble if you ever get audited by the IRS.
Can You Get an Extension?
It is possible to apply for an extension. However, there is no guarantee that you will get it.
Plus, if you don’t pay any owed taxes by your regular deadline, you could risk getting a penalty.
However, if you need more time to get any necessary paperwork, which can especially happen if you are living abroad, you can apply for an extension here.
Individual tax filers can use Free File to request an automatic tax-filing extension electronically. Filing this form gives you until October 15th, 2021, to file a return.
Filing your US taxes is mandatory by law. People who haven’t kept up with filing taxes were penalised this past year and did not receive stimulus checks.
Other penalties may apply if the IRS catches you not filing your tax returns and/or lying on your forms. I recommend using TurboTax to do your taxes affordably and hassle-free.
Freelancing can be a great way to earn cash and be flexible. We looked at the best tips for this career.
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