Filing taxes can be confusing, but there are tips available to streamline the process and ultimately maximize one’s tax refund.
You may have heard the quote from Ben Franklin that states, “In this world nothing can be said to be certain, except death and taxes.” Whether you are dreading tax season or looking forward to it because you expect a big return, it is helpful to have some tips that will guide you in the process.
1. Know the Common Types of Taxes
There are all kinds of taxes out there, but some of the most common you will face include:
Federal income tax – a tax on your income and earnings
State and local income tax – some states do not have income taxes, others have flat tax rates, and others use tax brackets, which means you will be taxed a different amount depending on your income.
Payroll taxes – taxes which are taken out of your paycheck by your employer.
2. Determine if You Need to File Taxes
You may be surprised to learn that not everyone needs to file an income tax return each year. Most taxpayers can take the standard deduction, which is an amount of income that is not subject to federal income tax. The standard deduction for a taxpayer for 2019 is $12,200. Therefore, if you earned less than that amount in 2019, and you don’t have any other source of income, then you do not need to file income taxes. The standard deduction amount decreases for individuals who are 65 and older. Another reason you may not have to file taxes is if another taxpayer listed you as a dependent.
If any of these scenarios doesn’t apply to you and you have a job and regularly receive a paycheck, then you may think you do not need to file taxes since you are paying them throughout the year. The fact is, the taxes that are being paid by your employer may not be completely accurate. This means you are still required to file. The good news is you could be entitled to a refund.
3. Understand The Options for Filing Your Taxes
There are three ways that you can file your taxes:
Manually. If you are seeking a free tax filing option, then the manual route is the way to go. With it, you must fill out a 1040 form and mail it to the IRS. While this option is free, it does substantially increase your risk of making errors.
Electronically. If you are interested in filing your taxes online, you can invest in a tax preparation software or online service. This could be an excellent option for you if your taxes are straightforward, but it may not be the best route if you have a lot of deductions, high income, or other potentially complicated scenarios when it comes to your taxes.
Through an accountant or tax preparer. If you are looking for an easy tax filing method, then working with an accountant or tax preparer is best for you. While you will have to pay a tax preparer, you will be dealing with a qualified professional who will be working for your best interest when filing taxes.
Claim all available deductions. You can lower your taxable income by claiming deductions for things such as charitable contributions and medical costs.
Use the optimal filing status. There are different ways to file your taxes that will maximize your return. For example, a married person can file jointly with their spouse but may benefit from filing separately from their spouse.
Check how much is withheld on your paycheck. If your employer is not taking out enough throughout the year, you could come to owe money during tax season. It is important to note that a change now will not impact your 2019 taxes, 2020 taxes would be the year in which you see the difference.
5. Do Your Research Before You File
There are ways to get a tax refund estimate before you actually file your taxes. You can access a free tax calculator online, which is designed to calculate taxes and give users a sense of whether they will receive a refund and, if so, how much they can expect.
6. Consider a Tax Preparer that Offers a Tax Refund Advance
According to the IRS, it could take six to eight weeks to receive your refund if you file manually and up to three weeks if you file electronically. If you don’t want to wait around wondering, “where’s my refund?” you can consider hiring a tax preparer that offers tax return advances. This means when you file your taxes, the tax preparer will provide your refund amount within 24 hours instead of being forced to wait to receive your tax refund.
For outstanding support, Freeway Insurance offers professional tax return preparation at a competitive price. Working in partnership with Tax Max, you’ll receive superior service, whether your tax filing is simple or complex*. Plus, you can get your money right away with an advance up to $6,000**.