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Time flies when you’re having fun, but while tax preparation may not be anyone’s idea of a good time, it doesn’t have to be a slow, painful process either.
Individual tax preparation consumed almost 8.1 billion hours in 2017, according to the National Taxpayers Union Foundation. You might think completing and filing your own income tax return would be more difficult than handing everything over to a paid tax preparer. But with the right approach, and a few simple tips, you can learn how to do your own taxes — and save yourself some time and money to boot.
Advantages of doing your own taxes
Whether this is the first year you’ll be doing your own taxes, or it’s been a few years and you want to try it again, there are many pros to consider.
Preparing your own income taxes takes some time and organization, but it can be good for your wallet. The average fee for professional tax preparation of Form 1040 and a state return with no itemized deductions is $176, according to the National Society of Accountants. If you choose to itemize, that average fee jumps to $273. Paying money to learn how much you owe Uncle Sam can feel like a double whammy to your bank account.
On top of saving a good chunk of change, doing your own taxes is empowering. You can learn a lot about how the IRS tax code affects you and make good decisions to positively influence your return. Remember, knowledge is power. Pay keen attention throughout the process and you may be able to save in ways you haven’t in the past. After all, you know yourself and your lifestyle better than any tax preparer.
Finally, knowing how to do your own taxes could mean a faster refund. During the first three and a half months of the year — often referred to as tax season — accounting professionals and tax preparers are extremely busy. You could wait weeks or even months to get an appointment.
Rather than waiting anxiously for someone else’s time, you can do your taxes as soon as all your tax documents are ready. If you learn the IRS owes you a refund, you can submit your return immediately and should get your money that much faster.
Simple ways to make tax prep less painful
Even if you understand the advantages of doing your taxes, tackling them on your own can still feel overwhelming. Fortunately, you can take steps to make self-preparation faster and easier.
Stay organized throughout the year
Designate one place to keep all tax documents and add to it throughout the year. This could include a file folder, box or other compartment in a secure location. Add tax records — receipts for charitable donations, bank interest statements, W-2s, 1099s, etc. — as you get them. That way you won’t have to dig around for lost documents or proof of expenditures when you want to file your taxes.
How long do you need to keep tax records?
You should keep records for items of income, deduction or credit shown on your tax return until the period of limitations runs out. For many records that means three to seven years, but be sure to verify IRS recommendations before shredding any documents. Learn more about how long to keep tax records.
Have a copy of last year’s return
When you adopt the mindset that tax organization is a year-round activity, you’ll have easy access to all your tax documents, including returns from previous years. That’s important because you’ll need information from last year’s return in order to complete this year’s return. Make a habit of printing or saving a digital file of your completed return every year for easy reference. Keep in mind that some online tax-preparation services may charge you to access previous returns.
Take stock before year’s end
Being proactive can help you minimize your tax bill and hopefully maximize your return. Consider important questions about tax deductions and tax credits you may be able to claim.
- Have you contributed all you can to your retirement accounts, such as an employer-sponsored 401(k) or your IRA?
- Can you add to your health-savings account?
- Are you able to make any additional charitable donations?
- How much did you pay in interest toward student loans?
- Did you have higher-education expenses?
- Did you have enough tax withheld from your paycheck, or if you’re self-employed did you pay enough in estimated tax payments?
Be mindful of deadlines for tax deductions. In some cases – such as a charitable contribution – you have to take action by Dec. 31 of the tax year to claim the deduction. Others, like making a contribution to an IRA, may give you until Tax Day to act. And don’t forget that your federal tax return might not be the only one you have to file. Depending on where you live or work and how much income you have, you may need to file a state tax return as well.
Make key decisions
When preparing your taxes, you’ll have to make some important decisions that will impact your tax bill.
For starters, you’ll need to choose your filing status. Additionally, you should review standard versus itemized deductions and choose the right option for you. This is especially important in 2018 as federal standard deduction amounts have nearly doubled over the 2017 amounts.
It’s important to give yourself plenty of time to do your taxes. Procrastination has many drawbacks, including higher levels of stress and risk of errors. The best strategy is to block off time to focus in a quiet, uninterrupted environment.
Consider a free, online tax-preparation service
When doing your own taxes, you could do it by hand and mail in your return, or you could choose to e-file. For speed, accuracy and convenience, it’s hard to beat e-filing. Plus if you pair e-filing with direct deposit, you’ll probably get your refund faster than filing paper forms by mail.
Plenty of software providers and online services provide e-filing. Some may advertise free filing, but often there’s a catch. Some allow you to file your federal return for free but then charge you for the state return. Some allow you to file for free if you take the standard deduction but charge you if you want to itemize. And some may even charge you if you have income reported on forms other than W-2s.
There can be many caveats to “free” filing software, so it’s important to understand what fees you might end up paying.
Remember, Credit Karma Tax® is entirely free. You can file both your federal and single-state tax returns without income restrictions. You can work for an organization or for yourself — or both. You can itemize or take the standard deduction. With Credit Karma Tax®, these differences don’t trigger a fee of any kind.
Get free help if you need it
When you do your own taxes online, your free tax-prep software should have a help center and customer support if you have any questions. If you still need assistance, numerous free resources are available to help you complete your taxes. Here are a few.
Individual IRS telephone helpline: 1-800-829-1040
If you’re 60 or older:
Doing taxes is probably not your ideal way to spend a few hours on a Saturday — or any other day for that matter. But by taking the time to do your taxes yourself, you’ll learn a lot while feeling empowered — and probably save some money too.