Tax season is here! For some of us, it’s no big deal, but some of us are stressed – mostly because we don’t fully understand the process. Here, we’ve compiled some tips that will hopefully ease the process.
Dates You Should Know
The IRS started accepting and processing tax returns on January 23. Employers had until January 31 to give or send out their W-2s, and most 1099 forms were due by the end of January as well. The most important date you need to know is April 18, the last day you can file your taxes. Now, if you aren’t ready, you can apply for an extension, which will give you until mid-October. So breathe easy; you still have plenty of time.
Decide Who Will Prepare and File Your Taxes
The awesome thing about technology is that you can file your taxes online via websites such as H&R Block or Free Tax USA. If you’ve had major life changes in the last year – such as a marriage or divorce, or you bought a house – you may not feel comfortable doing your own taxes, and we get it. If you’d rather someone else do them, you can hire a CPA or other tax professionals. We highly recommend figuring this out ASAP because the closer it gets to April, the more it could cost.
Know Your Forms
Let’s talk about some of the most common tax forms.
- W-9: This form is most commonly used by independent contractors, freelancers, and gig workers to provide identifying information such as social security or tax identification numbers.
- 1099: A 1099 is used to report income that isn’t directly earned through a full-time employer (including work done as an independent contractor or freelancer).
- W-4: This form tells your employer how much federal income tax should be withheld from your paycheck.
- W-2: The W-2 is what an employer sends to payroll employees by the end of January, documenting how much money they earned working and how much tax was withheld.
- 1040: Umbrella form for individual tax return
- 5695: Declares any residential energy credits you may qualify for
Decide Whether You Can Be Claimed
There are two ways you could still be claimed as a dependent:
- If you are under the age of 19 or under the age of 24 and attend school full-time, and your parents provide over half of your financial support.
- If you made under $4,400, lived with your parents, and your parents paid more than half of your total support.
Why does this matter to you? When you prepare your return, you’ll have to indicate whether someone can claim you as a dependent. So the lesson here: Talk with your parents first to find out if they plan on claiming you.
Check Out the New Rules
Tax rules on deductions and credits tend to change, so unless you’re just in the know, you probably haven’t gotten the scoop just yet. If you file your taxes using a website, these rules are often explained as you go. However, if they aren’t made clear, this is when you may need to enlist the aid of a tax professional who can walk you through these changes.
Here are some credits and deductions to consider: education credits, student loan interest deductions, standard or itemized deductions, earned income tax credits, clean energy vehicle credits, and or home office deductions.