The big news this tax season is that the deadline for filing has been pushed back from April 15th to May 17th. This decision was made in light of the ongoing coronavirus pandemic, and it gives taxpayers a little more time to file their taxes.
That said, it never hurts to start preparing a little early. And if you’re new to filing taxes, or you’re not sure you’ve done it correctly in the past, then you may want to go over the basics of filing. Fortunately, even though filing your taxes seems intimidating, it can be fairly straightforward once you answer a few questions.
Who has to file their taxes?
If you’re reading this, you probably need to file a tax return. If you’re a dependent or your income is very low, you may not need to file, however, there can still be benefits to filing in these cases. So it’s best to check with a tax professional if you’re unsure of whether or not you should file.
What will I need to file my taxes?
The first step in filing your taxes is gathering the forms and documents you’ve been sent throughout the year.
If you’re a full-time employee, your employer should have sent you a W-2 form, which documents how much you earned throughout the year and how much of it has been withheld already for your taxes. Your company is required to send you a W-2 by January 31st, so you should have it by now.
If you’re a contractor, freelancer, or otherwise work part-time, you should have received some type of 1099 form from your clients. A 1099 documents money you earned outside of any W-2 income. There are several different 1099s, but they also should have been sent to you by early February at the latest.
- You’ll also need documentation or receipts for any other type of income you received throughout the year. This could include income from investments in the stock market or rental properties, for example.
Finally, if you paid quarterly taxes, property taxes, or any other taxes throughout the year, gather the documentation for those payments.
What’s my filing status?
When the government asks you to choose a filing status, they’re asking about your current marital status. The two most common filing statuses are “single” and “married, filing jointly.” However, you may also be “married, filing separately” or a “qualifying widow(er)”. Finally, if you’re not married, but have dependents, you may file as “head of household.”
Your filing status determines your eligibility for different tax credits, deductions, and rates, so it’s important to make sure you’re filing your taxes under the correct status.
Should I take the standardized deduction or itemize?
One of the major decisions you’ll make while filing your taxes is whether to use the standard deduction or to itemize your deductions.
First, it helps to understand what these terms mean. When you take a deduction, you deduct an amount from your taxable income, which in turn reduces your tax liability. This is different from a tax credit, which reduces your actual amount of tax owed.
The standard deduction for 2020 is $12,400 for those filing singly and $28,400 for a married couple filing jointly. This is the option that most taxpayers will choose to take. You should only itemize your deductions if the total amount of the deductions you can claim is greater than the standard deduction. This is unusual, but by no means impossible. Deductions exist for a wide range of expenses, especially for those who are self-employed.
For more information on both deductions and credits, check out this helpful list from the IRS.
How can I file my tax return?
There are three ways to file your return. You can e-file, mail a paper return, or use the help of a tax professional. The IRS discourages mailing a paper return, as it’s less safe than filing online.
While there are a plethora of online companies that will file your taxes for a fee, you can also file them for free through the IRS. However, free filing with the IRS is only available to those with an income of less than $72,000 annually. Keep in mind, if your state has an income tax, you will also need to do that on your own if you choose this option.
Your last option is to get professional help with your taxes. This is a great option for many people, especially those with businesses or complex tax returns that would benefit from individualized attention.
If you need help navigating your taxes, contact AG Fintax today and let our professionals guide you through the process.