Filing Your Own Taxes Online
Filing Your Own Taxes Online Like A Pro With The Help Of These 2 Tips
The 2020 tax year is almost over as we approach the October 15 extension filing date. Now is the time for tax planning for the 2021 tax year that is rapidly approaching. Covid and its variants are still causing problems for many and inflation is also rearing its ugly head. If you’re filing your own taxes online, you need to be aware of changes for this year.
Tax credit advance payments for those with children are being sent, and many remote workers have not returned to their offices. From what we’ve observed, many of them don’t want to return to the workplace, and are enjoying the convenience of working from home.
This is now the third year where the pandemic has caused various tax changes, lifestyle changes, and changes in society in general. It looks like tax year 2021 will be another tricky year for taxes, so planning on how to do your own tax return is highly recommended.
You can expect your 2021 tax return to be a little more complicated again. Another stimulus payment was sent early in the year, and even though it’s not taxable, will more than likely cause confusion for some as it did in 2020.
Another item for 2021 that taxpayers need to be aware of is the advance child tax credit. Monthly payments were sent to millions of taxpayers with children while many more elected out of them. These payments will need to be accounted for when filing your own income tax, unless you see a tax professional, and will surely end up in confusion for many.
This will be the first time that advance tax credits were sent, and some taxpayers that received them, and weren’t entitled, will have to pay them back when they file their tax return.
A couple of items that were on the 2020 returns are carried over to 2021. The first is unemployment compensation. In 2020, Congress allowed the first $10,200 to be exempt from taxable income. So far this year, nothing has been decided. If you’re doing taxes by yourself, keep this in mind.
The second concerns remote workers who work in different states. Many states have financial difficulties, and are looking everywhere to take in more funds, and the remote worker is caught in the middle. If you’re filing your own taxes online, you will have a lot to digest come tax time.
To get you better prepared when tax filing comes around, we’re listing two important things you need to start doing now so you don’t get caught owing the IRS or your state, a lot of money.
1. Prepare an estimate of what your 2021 tax return will look like
Even in normal times, we recommend that you do this to be sure your withholding is on track. Now, with the various changes to account for, it’s even more important. You know what the changes are, and you need to see how or if it affects you. By doing an early projection, you may be able to maneuver a little to keep from owing a lot of money if you file your own tax return.
For those who use a tax professional, take your 2021 annualized income and/or expenses to him, and see if you’re affected. Most professionals don’t charge for this service.
If you plan on filing your own taxes online, there’s no reason why you can’t do this by yourself. Get a copy of your 2020 tax return and go down line by line, listing the numbers for 2021. Just make sure you’re using numbers for the full year.
No matter if you do your taxes by yourself or go to a tax professional, there are many free resources you can take advantage of to help you through the process. The IRS website at https://irs.gov, has a lot of free information for you to use. You may even find other tax credits that you’re eligible for and weren’t taking.
When you file your own tax return, the IRS isn’t going to scan it to make sure you took all tax credits or deductions you’re eligible for. Their only concern is collecting all taxes that are due them.
2. Keep all tax documentation for income and expenses organized
This is one issue that so many taxpayers have a problem with, and then when tax season rolls around, they wonder why information is missing. Keep a folder for each year, and anything that has to do with taxes, should go in there all throughout the year. It makes for a much easier tax filing.
For your 2021 return, the various tax changes and credits may have an effect on you. If so, getting everything in order now will save you a lot of stress later on. This year, many more individuals will be impacted in some way, so it’s important to stay on top of it.
We recommend that any life changes you went through this year be noted in the tax folder. This includes natural disasters, going back to school, started a new business, got married or divorced, or had children.
Any of the above changes could have an effect on your tax return, so keep a list, and if you are filing your own taxes online, you can learn more about how changes affect your taxes. If you use a tax professional, take the list to him, and let him be aware of the changes. The pandemic changed a lot of things, and maybe your taxes too.
An accountant and tax preparer by profession, Gust’s true passion lies in his company blog titled “HBS Financial Group, Ltd.”. Through this venue, he not only tries to teach individuals about budgeting, money management, and taxation but he writes the majority of the articles as well.