Dear Prism experts,
Any tips for filing taxes?
Answer:
Filing your taxes on your own this year? We've got you covered! Read below for our tips on independently filing your taxes, and good luck!
1. Get Organized
The IRS is nothing if not meticulously organized. You’ll save yourself a lot of time if you make sure you have everything you need before you sit down to tackle your taxes (you can use a checklist to help determine what information you’ll need).
You should have received your W-2 by now from each place of work you received a salary from. Your W-2 includes how much money you made, as well as the amount of taxes that were withheld. If you’re an independent contractor, you will receive a 1099 instead. Keep in mind that 1099’s only include the money you made without withholdings, so you’ll need to figure out how much you owe in taxes. If you have any income that needs to be included on your tax return but you didn't receive a form for it (like freelance work), you’ll want to track down those records as well.
Other forms you may receive include interest or investment earnings from your bank, student loan interest, or records of contribution to an IRA. You can also comb through your receipts, credit card statements, bank statements, and checkbook and make a list of payments that might be deductible.
2. Figure out how to file
Don’t just default to filing the way you did last year. Many life events, such as marriage, divorce, having a child, graduating from college, or taking in an elderly parent may indicate a change in your filing status. Many taxpayers use software to complete and file their returns (e.g. TaxACT, Turbotax), or you can consult an accountant if you’d like more personal help.
3. Don’t overlook deductions
Many taxpayers end up leaving money on the table due to deductions that were overlooked. It’s generally a good idea to run the numbers on your tax return twice to make sure you didn't leave anything out, and brush up on common deductions and tax credits (a deduction will reduce your taxable income; a credit will reduce your tax liability).
Some common deductions/credits include: local and state sales taxes, charitable contributions paid via payroll deductions, child and dependent care credit, job search expenses, and earned income tax credit.
4. File on time (or get an extension)
Make sure you leave yourself plenty of time before the April 15th deadline to file your taxes, allowing extra time just in case you run into any problems. To be considered as filed on time, a paper return must be postmarked by the end of the day on April 15th. If you’re filing online, your return is not considered filed until the IRS acknowledges acceptance of the electronic portion of the tax return, so allow yourself an extra day or two to make sure your return is accepted.
If you need more time, file for an extension.
5. Plan for next year
Now that you've gone through the process, keep track of the records you need for when you file. If you use tax software or an accountant, both will offer you the opportunity to do some planning for the following year. This is also a good time to make some adjustments; if you received a large refund, you may want to consider tweaking your W-2 so you get more money back with each paycheck, instead of all at once. If you owed a lot in taxes, you may want to increase your holdings on your W-2.
(While you’re at it, might as well get on top of your bills as well. If you haven’t already, you can download the Prism app here!)
We hope this helps! Please let us know if you have any questions or comments, and don’t sweat it – you've got this!