How to File Your Own Taxes and Save Money
While a Computer Generated Form is Not Essential, It Does Make Life Easier
Inexpensive Tax Software in Available Online and Will Save You Time and Money
Many people are intimidated by the idea of filing taxes. However, with a home computer, an internet connection, current tax software and the necessary documents, you can easily file your own taxes at home in a few hours.
My husband and I used to always use a tax preparer to file our taxes, and we advised our adult children to do the same. However, as our children grew older and began to file their own taxes, they showed us how easy it can be. They completely modernized our thinking. In fact, I am always amazed by how much I have learned from my adult children, especially when it comes to using technology. While I was a little distrustful of my ability to file our taxes online, my kids convinced me that this was something my husband and I could and should do for ourselves.
If you own a business, have income from a number of different sources, or you have a lot of complicated long-term and short-term gains, you may still prefer to use a live tax preparer to help your with your taxes. However, the vast majority of Americans will discover that they are perfectly capable of preparing their own taxes.
TurboTax is the Leading Developer of Tax Software
TurboTax provides a variety of different types of tax software, so you can choose the one that will work best for your personal or business needs. Note that some of the Turbo Tax products will allow you to instantly download their software using your internet connection, and products will mail you the disks. In addition, some of the Turbo Tax products are for the PC, and some is for the Mac. Make sure you are buying the one you want before placing your order.
If you want to read more about any of the tax software from Amazon mentioned in this article, simply click on the blue product name and you will be taken directly to its Amazon homepage where you can see prices, etc.
When you click on a product name, you will be taken to Amazon's site where you can check out the other software options, too. You will also be able to look at the various options before your order goes through.
Federal and State Returns Available in a Variety of Formats
If you live in a state without a state income tax, then the software above, which only deals with Federal taxes, is probably all you need. If you have to file state taxes, then this is the software that you will need. Click on the blue product name to go to its Amazon page, so you know that you are getting the right format for your computer.
What If You Also Own a Small Business?
Do you own a small business or work from home? This software package includes what you need for both your home and business returns. It is also available in a variety of formats ... discs or downloads.
This Is The Software You Need to do Both Your Home and Business Taxes
Even if you own a small business, you can still file your taxes yourself, as long as you have the correct software. This package will help you file both your personal and business taxes with the Federal and State governments. Click on the blue product name to make sure you are ordering the right format for your computer.
Do You Need to File Your Taxes?
The U.S. Government has a record of most of the income you receive each year, so they will know if you fail to file your taxes, or if you under-report what you earned. In addition, even if you earned very little, you may be eligible for a tax credit or tax refund. You won't know if you don't file.
Any business that has paid you over $600, and any financial institution, mortgage company or student loan agency that has charged you interest, is required to provide both you and the Federal government the appropriate forms. They must mail you the appropriate documents by January 31 each year. Therefore, the government already knows how much you should be showing in income, as well as the amount of your major deductions. By filing a tax form you are simply confirming what they already know.
In addition, you are informing the government if you have dependents or additional business expenses you can deduct, if you had unusually high medical expenses, or if there are other circumstances that could lower your tax liability. Your tax form also allows you to settle up financially with the government. You may need to pay them a little extra money or, for many of us, you will get a refund.
Have the Necessary Tax Documents on Hand
Before you begin to enter information into your tax software, you will need to make sure you have the necessary tax documents on hand. You will receive these documents either by mail or by e-mail. You should receive income forms from your employers and financial institutions, as well as anyone who has paid you more than $600 during the year for services or contract work. You should receive interest statements from your mortgage companies and student loan providers. Here are examples of the forms you are likely to receive:
W-2: This is the income statement you will receive from each employer you worked for during the past year. It shows how much you earned, as well as your withholdings for income taxes, Social Security, Medicare, retirement plans, health insurance, etc.
1098: This is your mortgage interest form, and for most homeowners your interest is tax-deductible. Your lender may not use an actual 1098, but a form of their own, and this is perfectly acceptable. It will provide you with the information you will need.
1098-E: This is the form that shows your student loan interest. You will receive one if you have paid at least $600 in interest during the past year. If you just took out the loan, you may also be able to deduct loan origination fees or other loan expenses your incurred.
1099-INT: This form reports the interest your received from a bank account if it exceeded $10, or if you cashed in a savings bond.
1099-DIV: On this form you will see the earnings you received in dividends and capital gains distributions if they exceeded $10.
1099-B: Did you sell stocks, bonds or mutual funds during the year? Then your broker or mutual fund company will report the information on this form.
1099-G: If you received a refund from your state or local taxes during the previous year, you will have to report the income that is shown on this form.
1099-K: If you have received payments from PayPal, Amazon, eBay or similar companies, you will receive these forms. However, if you received income through these sources and you do not receive a 1099-K, you are still expected to report it.
1099-R: Did you get a pension or distribution from an IRA or other retirement plan? You will receive this form.
1099-MISC: If you are self-employed and earned over $600, you will get one of these forms from each independent job you had during the year. You still have to pay taxes on all those little projects! However, if you were paid through a third party payer, such as PayPal, they will issue a tax statement to you, instead.
If you made contributions to an IRA or an education savings account during the year you may receive forms 5498 or 5498-ESA. They can run late. If they do, in some cases you may have to file for a tax extension.
If you received money from an estate, trust, partnership or S corporation, you will get a Schedule K-1. However, they can also run late.
If you need documents and cannot get them by April 15, you may need to file an extension. Once you have everything, however, you should be all set to do your taxes using your home computer and your tax software.
If you have a problem or have any questions, you can also call the IRS tax hotline and real people will help you. Their number is (800) 829-1040.