Taxes are the lifeblood of the government, as we have been educated early in life. We may have learned about taxes from our parents, from school or from public and private offices we have visited. As law-abiding citizens, we are duty-bound to pay our taxes regularly to help contribute to the various projects our government will undertake. While some dread the tax season due to the filing and paperwork involved, others have learned through experience how to make their tax filing more convenient. Ideally, filing taxes shouldn’t be a complicated task if you’re armed with the right knowledge. Here, we’ll share some useful tips on how to easily file for taxes.
Know Your Tax Bracket
Knowing your updated tax bracket can help you file the right form and tax schedule. While most people who are working for companies and businesses as employees usually have their tax deductions handled by their employers, those who are newly employed must complete the W-4 form for their employees. It can be a tricky process if you don’t know the essential information related to your tax, such as your current annual income and which tax bracket you belong to. Knowledge of such crucial pieces of information can properly set you up for payroll withholding.
We should also be aware that many individuals are self-employed or are earning money as freelancers. If your source of income falls under this category, it is important to know how to file quarterly taxes most efficiently and conveniently. Starting with filing for quarterly taxes is more complicated than income tax filing, as you need to estimate how much tax payments you are going to make every quarter. Also, unlike income tax, there is no automatic withholding method for quarterly tax, and you need to be prompt with your tax payments to avoid dealing with huge fees.
Prepare Your Tax Documents
As mentioned earlier, the W-4 is what new employees fill out to determine how much tax will be withheld. As you progress to several years in your job, the W-2 will become a significant document. Although it is the employers that fill out this form at the end of each year to indicate that the amount indicated in your W-4 has been withheld, you and the IRS will need to get your respective copies so that you’ll know the total amount withheld, and if you can expect a tax refund.
Form 1099 is also important if you are receiving income outside of your regular salary. Doing tutorials, consultancies, freelance gigs, and other income-generating activities outside of your line of work declared in your W-4 and W-2 need to be declared and are subject to applicable taxes. This is the purpose of form 1099 wherein you will declare such updates in your income.
Your mortgage interest statement or form 1098 comes in handy if you are paying $600 or more in interest and points for your mortgage. This can help reduce your taxable income and the overall amount you owe the IRS.
If you have investments where you receive interest, dividends, or capital gains, you’ll have to check with the IRS if you need to file form 8960 (Net Investment Income Tax) or not. It is important to be familiar with this and other tax forms and prepare them in case you are required to file them.
Weigh the Standard Deduction and Itemizing Options
Taxpayers take the matter of tax deductions seriously because tax deductions lower the taxable income, which in turn, means a smaller tax bill. When you file your taxes, you can choose between the standard deduction and itemizing your deductions. When it comes to convenience, the standard deduction is the government’s designated standard subtraction that is automatically calculated and applied to your tax bill. If you are a single filer, your standard deduction for the 2019 tax year is $12,200 and it is $24,400 for married couples filing jointly.
With proper preparation and calculation, itemizing can be advantageous, especially if the total amount is more than the standard deduction. You’ll need to present proof of your itemization so be sure to secure your receipts and prepare tax credits such as medical expenses, childcare, educational costs, and charitable giving.
If you have doubts or confusion about which option to choose, it is a wise option to consult a tax professional to get expert advice on your best course of action for filing your tax.
Know Your Filing Status
This is an easy and straightforward process, and it will help you know your eligibility for certain tax credits, how much your standard deduction is, and the total amount you’ll owe in taxes. There might be different stages or changes in your legal status as an individual, and they may present options that can help lower your tax bill. Listed below are the common filing statuses:
- Single – you can select this status if you are not married, legally separated, divorced, or widowed before the tax year.
- Married Filing Jointly – this is for married couples who agree to file a joint return. This is advantageous for couples because they can usually save more in this filing status.
- Married Filing Separately – married couples can opt for this option if they deem taking care of their taxes separately or if individual tax filing can give them a lower tax bill.
- Head of Household – this can be a bit complicated, but you can qualify if you have paid for more than half of the household expenses for the year, you are not married, and you have a qualifying child or dependent.
- Qualifying Widow/Widower – for individuals who have deceased spouses and have not remarried within the same tax year, they can file jointly with their deceased spouses. This option can be availed by the surviving spouse for two years following the year of death.
Knowing the basic and essential information about tax filing can help you get through the process smoothly. The government and the various private tax professionals are also offering resources and references that can help you with your questions about your taxes. Staying diligent and committed to your tax duty can help you and your country in many ways, so file your taxes right and on time.