April 15 is the day we dread for the entire year. What is April 15, you ask? It’s Tax Day. Tax Day is the official deadline for filing your taxes and the days leading up to it are filled with a lot of stress and anxiety. We tend to forget about this day for the entire year until all of a sudden you blink, and it’s here.
This is a guest post in collaboration with Alycia Coloma.
Because no matter how long you have been filing your taxes for, you never quite get it down. Understanding your taxes can be extremely confusing. How much gets taken out? And from where?
There are a lot of unknowns when it comes to filing your taxes but it’s important to be aware of these so you know what is affecting your money. As confusing as your taxes may seem, it helps to break it down into a few key components.
Here are four things to know about your taxes:
1. Make sure your filing status is correct
Your filing status is important as it determines how much you save or pay in taxes. It is determined by your marital status, number of children, occupation, as well as a few other factors. It is imperative you put your filing status in correctly so you’re not stuck with an audit. Your filing status determines your tax rate, eligibility for deductions, and the amount of the standard deduction.
2. E-File Your Taxes
Filing your taxes can get complicated, but using a tax software makes the process a little bit more bearable. Tax software will provide you with the forms that you need, so you file your taxes much quicker and easier. Once you file your taxes, you may be wondering: when will I get my tax refund? Well, the benefit of E-filing your taxes is that you’ll get your refund within 21 days after acceptance, compared to 6 to 8 weeks if you do it by mail. That in itself should be enough to persuade you that E-filing your taxes is the way to go.
3. It’s different filing your taxes if you’re self-employed
When you have an employer, they will withhold taxes from your paycheck and give it to the IRS. However, when you’re self-employed, things get a little bit more tricky. In this case, you will have to turn the money over to the IRS yourself. Anyone who gets a 1099 is considered self-employed and will have to make estimated tax payments. You can use a self-employment tax calculator to help you determine just how much you owe to the IRS.
4. Understand your deductions when filing your taxes
There are two different types of deductions: standard deductions and itemized deductions. Most taxpayers claim standard deductions as you don’t have to go through all the work and instead, the total income you are taxed on is reduced. Itemized deductions require more work on your part, as you have to identify every deduction you qualify for, but doing so could save you thousands of dollars. If you want to itemize your deductions, you have to keep track of anything you spend money on throughout the year that could be deducted from your taxes, such as medical bills and charitable donations. If your itemized deductions exceed the amount of standard deductions, then it’s more money in your pocket.
Understanding your taxes is undeniably a complicated and stressful process. But it is an important process to know to save yourself valuable time and money. So that when April 15 rolls around, you don’t find yourself cramming at the last minute, panicking about filing your taxes. Do some research and you will be handling your taxes like a pro in no time.
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