All About Filing Taxes
Generally, any single dependent under the age of 65 must file taxes federally if their unearned income (like from dividends or taxable interest) is more than $1,050 or earned income is greater than $12,000. This may slightly vary year to year.
Luckily, the IRS has a calculator on its website that allows you to enter your information to determine if you do indeed need to file your taxes or not.
Why Do You Have to File Taxes?
You must file taxes in order to determine if you owe taxes or if you are due a refund amount. Filing taxes will also help you determine if you qualify for the EITC (Earned Income Tax Credit). The Earned Income Tax Credit is a refundable tax credit for low-to-moderate-income taxpayers with children. The amount of EITC benefit depends on your taxable income and the number of children you have.
The purpose of filing taxes besides determining whether or not you owe taxes or are due a refund is to help support many government entities. Some of these supported entities include:
• Government workers
• The police department
• Construction work
• Public libraries
• Public parks
What Documentation Do You Need to File Taxes?
Forms you may need:
• 1099-DIV – dividends
• 1098-E – student loan interest
• 1099-ES – Records of estimated tax payments made
• 1099-G – unemployed state tax refund
• 1099-K – if you made third party transactions like to PayPal
• 1099-LTC – long term care reimbursements
• 1099-MISC – for those who are self-employed and receive $600+ from a client
• 1099–R – distributions from retirement plans, IRA accounts, pensions, annuities, etc.
• 1099-SA – HSA (Health Savings Account)
• 1099-SSA – Social Security
• RRB-1099 – RRB Account
• Form 1040
• Form 1095-A
• Form 1098
• Form 8332 showing parental rights that are now yours
• W-2 forms
More information you may need to have ready:
• Auto state taxes paid
• Awards and Prizes
• Bank Statements
• Business and self-employed asset information for depreciation purposes
• Charitable contributions and donations
• Childcare records including the provider’s tax ID # if applicable
• Classroom expenses if you are a teacher
• Crypto-currency transactions
• Education expenses
• Federally declared disaster information
• Gambling winnings
• Hobby income and expenses
• Income from the sale of stock
• The income of older adults in your home
• Information to claim child tax credit – childcare fees
• Investment expenses
• Jury duty records
• Last year’s taxes (both federal and state) – not required, but will surely help you!
• Lottery payouts
• Medical Bills
• Mortgage interest
• “Office in Home” Information
• Property taxes
• Real estate and personal tax records
• Receipts for energy-saving home improvements
• Records of all self-employed expenses (check register, credit card statements, and receipts)
• Rental Asset Information for depreciation
• Rental Income and expenses
• Retirement account contribution information
• Savings and Investments
• Scholarships and/or fellowships
• Social Security numbers and/or tax ID# from everyone on your tax return
• State and local taxes
• Taxes from last year (both federal and state)
This is not a complete list, but it should be just about everything you need when filing a basic tax return. Check out this link for an even longer, more thorough list of things you may want to have handy when filing your taxes.
When is the Deadline for Taxes?
Your tax return for 2019 is due on April 15, 2020.
How Do You File Taxes?
The first step in filing your taxes is determining your filing status. The following link on the IRS website will walk you through a questionnaire that will let you know what your filing status is. It should only take you about five minutes to complete this step, so there’s no reason not to use it.
The next step is to choose a free file option based on your income and tax return type. If your income is less than $69,000, you can file taxes free with their easy-to-use software program. There are also other helpful links for taxpayers on this page.
For example, there are instructions on how to use the software program, including a list of what you need to have available in order to file taxes in 2020.
Finally, if your income is greater than $69,000, you can use the free file fill-able forms offered by the IRS on their website. Unfortunately, this option is a little bit more complex than the one for those who make less than $69,000. Therefore, you must know how to do your own taxes.
It’s a good idea to hire a tax professional or file your taxes on a free tax preparation site. This way you can be sure that your taxes were filed right the first time around.
The free fill-able forms do the math for you, but there is only a basic guide available, so you must be somewhat familiar with the forms, and you must meet minimum computer requirements so you can file your taxes properly. Also, you must have last year’s tax return ready and available for reference.
Another neat option available when filing online is the electronic signature; it does not require a signature in person or on paper; you can just sign your name on the computer.
The following link will help you understand the most common mistakes taxpayers make when filing their own taxes. Check it out to avoid any errors on your tax return. After all, the last thing you want is to spend the next year straightening out your tax return, especially if the mistake was a simple math error or something.
How Do You Pay the IRS for Taxes You Owe or for a Possible Refund You Earned?
Once you have completed your 2020 tax return, you will be able to determine if you owe more taxes to the IRS or if they owe a refund to you. If you owe the IRS more money, send them the correct amount when you file your taxes.
There are three ways to pay the IRS. The easiest way is to pay your taxes directly from your bank account (checking or savings) with IRS Direct Pay; this option is free of charge. They do allow tax payments to be paid off on credit or debit cards; this option is available online or by phone. The official IRS phone number is 1-800-829-1040.
Finally, if you cannot pay the amount you owe, the IRS can work with you. The most important thing is for you to communicate with them and to let them know about your financial situation. There are many payment plans offered by the IRS. The most popular is the Installment Agreement that allows taxpayers to pay what they owe in installment payments rather than all at once.
The following link shows the details of all three options.
Where Do You Send Your Completed Tax Return?
For those who fill out Form 1040, you have three options. The first is to mail your 1040 completed form to the IRS along with any payment you owe. The second option is to use a tax service or tax software program; they will file your tax return electronically for you. Finally, if you choose to use a tax professional, they will file it and turn it in on your behalf.
How and Why Do You Keep Tax Files?
Save a copy of your tax return each year for your records. If the IRS audits you for some reason or has questions about your tax returns, it’s a good idea to have 7 years worth of your tax returns readily available. Use a filing cabinet or plastic bin and label each folder of your taxes with the applicable year.