You know what it means to take the responsibility of filing your own taxes? More than deciding to bravely step into the fog-veiled quagmire of the U.S. tax code, you have crossed into the realm of…adulthood. There is nothing more that says, “I’m now a full-fledged adult,” than filing your own taxes. However, if you were in school last year, you may not be cutting the apron strings quite so cleanly.
If you were under the age of twenty-four at the end of the year, a full-time student, and you were supported by your parents, they can still claim you as a dependent on their taxes. So, if this is your situation, check with your parents before filing your return to see who gets you. Yes, even if your parents claim you as a dependent, you probably still must file a return. As of 2019, if you were single and earned income (as a dependent) was more than $1,100, your earned income was more than $12,200, or your gross income was more than $1,100, or $350 plus your earned income up to $11,850, (whichever was greater), you must file.
Yeah, it’s already murky, and you haven’t even looked at the forms. Get used to murkiness; it is the way of the IRS.
Remember this: unless you have a very unusual situation, you must prepare a tax return each year, and will need to continue to do so until after the last nail is pounded in. Seriously, while the tax code is its own matrix, and you can’t escape (legally) from filing, there are reasonable solutions to prepare and file your taxes without becoming a tax attorney or CPA.
Tax attorneys are just one of the experts out there who will do the tax preparation job for you. The only thing about using a tax attorney is that they don’t come cheap, and typically handle more complicated returns or preparation for those later in life during their peak earning years. But hey, if you got a sweet job at a tech startup or are a trust-fund baby, then a tax attorney is the way to go.
For the rest of 99.9% of the ITN’s (income tax newbies), there are simple and inexpensive ways to prepare and file your income tax. Here are the most common.
Doing your taxes by hand is the time-honored way of using a pen to fill-out the forms the IRS sent you in the mail. This will cost you the price of a postage stamp. Double check your math; the IRS says the number one mistake on returns is math. If your tax situation is very basic, meaning you only have income to report either from wages, interest, or unemployment, then your Form 1040 should only take you an hour or less to complete the first time. It’s one page (double-sided) and straightforward. Note that the IRS now requires most returns to be e-filed and completing your tax returns by hand is impractical in most cases. My advice is to avoid this method if at all possible.
You can file through the IRS website for free if your adjusted gross income (AGI) is under $69,000 (as of 2020). The IRS contracts with different firms to prepare and file individual tax forms. If you use the IRS’ free offer to prepare and file electronically, it’s very important for security reasons to ensure you receive the service at no cost and to access the service providers directly through the IRS website.
Tax Preparation Companies
This category includes companies such as Liberty Tax, H&R Block, and Jackson Hewlett. Most of these companies are franchises, so charges (and competency levels) can vary by location. Generally, there’s a basic fee of around $120 that includes preparing a very simple federal return, one state return, and filing the forms electronically. Charges can increase with each additional prepared form.
Tax Preparation Software
Turbo Tax and the tax preparation companies above offer access to tax preparation software or services online. You input the information and the program prepares your taxes. You can print and send the forms via snail mail or file electronically. All tax software companies include free electronic filing in the price. The cost of a basic program is around $50.00. Most tax preparation software has an “interview” process that makes using them easy. Also, most allow for direct importing of information from W2s, Interest, and Mortgage statements. The basic software does not include preparing a state income tax return; that’s an additional charge.
No matter what system you use, you will at minimum need the information on your W-2 form. A W-2 form is a wage and tax statement from your employer that usually arrives by mail. There are multiple copies because your state and possibly your local government will need one. Everyone wants a piece of you…or at least your money. You may also need other statements: basically, if you receive any official-looking statements or forms in the mail from the beginning of January to the beginning of February, hold on to them. Usually, the forms state that they will be needed to do your taxes. If you plan on filing electronically, plan ahead, and file before April 15th. It may take a day or two to get confirmation from the IRS that they received your return, especially if something is missing from it. Also, don’t forget to do your state’s income tax return.
Do not be daunted or afraid by this U.S. time-honored initiation into adulthood. You can do it!! Remember: It’s less (maybe only slightly) painful the having a body part pierced with an arrow.