There are two types of people in the world: those who sort out their tax returns as soon as the new year hits and those who are still rattling around at the start of April (basically the end of tax season) wondering what happened to their W-2. If you fit squarely in that second group, this article is for you.
Tax season is widely dreaded, not just because it can come with an unwanted cost but also because the paperwork is famously time consuming and confusing. From seemingly endless forms to extremely specific questions that make you wonder if you even understand your own financial situation, filing your return is rarely a fun experience.
Despite all that, tax time is a necessary evil that we all must battle through, and with a little guidance, it is totally manageable for even the most overwhelmed among us. Whether you’re looking to hire an accountant, complete your tax return yourself, or just get some information on how to be more prepared for the future, keep reading for tips and tricks to get you through tax season. You’ve got this!
Yes, Tax Season Is Upon Us
Sorry to be the one to break the news. For most American taxpayers, the filing deadline to submit your 2021 tax return and pay any tax owed is Monday, April 18, 2022. This is also the date by which you need to file for an extension, should you require one. Penalties for filing late can be expensive, so make sure you get organized now!
Having said that, don’t let the looming deadline intimidate you. Filing your tax return is a task that often gets blown way out of proportion—while sometimes annoying and inconvenient, it is very doable!
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Do You Need an Accountant?
Whether or not you need an accountant to file your taxes really depends on your personal circumstances. Hiring an accountant can be quite expensive, but you may actually end up getting a higher refund since tax professionals are often able to get you higher deductions. If you have a complicated return, like you own your own business or experienced significant life changes during the year, it may be best to get an accountant. Another thing to consider is the time it takes to prepare and submit your tax return yourself. If you don’t have the time, just can’t be bothered, or are worried you could make mistakes that may end up proving costly, hiring a tax professional is worth looking into.
In regards to finding the right accountant for you, often, the best place to start is by asking people that you work or live with for the name of who they use, since their tax situation is likely to be at least somewhat similar to your own. Otherwise, H&R Block and Jackson Hewitt both have locations all over the U.S. and are able to handle a wide range of tax returns at relatively affordable prices.
It is also worth noting that you may come across professionals who advertise themselves as “bookkeepers” rather than accountants. So what’s the difference? While an accountant is likely to have special training, even including a college degree, a bookkeeper has less regulations. Hiring a certified accountant is generally more expensive than hiring a bookkeeper, but if you run your own business or have ongoing complex tax issues, it may be worth it. For most people who are just submitting a standard individual return, a bookkeeper will be able to do the job without issue.
What About Do-It-Yourself Options?
For those with simple tax returns, there are a range of online options to file your tax return yourself. If you are single, have no dependents, you work for an employer, and your tax situation is otherwise relatively simple, preparing and submitting your own taxes are quite manageable for most people. In this case, hiring an accountant, or even a bookkeeper, is an expense you can probably avoid, especially since there are a variety of easy-to-use tax software programs available to assist you. H&R Block and TurboTax both offer free do-it-yourself online tax software for simple returns, with more comprehensive options available for a charge if your return is more complex.
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Making Sense of All the Forms
If there is one thing everybody knows about tax season, it’s that there is a form for absolutely everything. While the list below is not exhaustive, it covers some of the forms you are most likely to deal with when preparing and filing your taxes.
- Form 1040: You will use a 1040 to file your taxes. This is where you declare your filing status, announce deductions, claim credits, and determine your income tax amount.
- Form W-2: At the end of each year, employers will send a Wage and Tax Statement (W-2) to an employee and the government, showing the employee’s wages and the amount of taxes that were withheld from their paycheck. If you worked for multiple employers throughout the year where you earned a wage or salary, you will receive a W-2 from each of them.
- Form 1099-NEC: If you are a freelance or contract worker, this one’s for you. A business will use a 1099-NEC for reporting all non-employee compensation, so every side hustle where you don’t have a defined employment contract will give you one of these.
- Form 1099-MISC: For all miscellaneous income like rent, royalties, prizes, and awards, a 1099-MISC is used.
- Form 1098-E: If you paid interest on student loans, that amount will be reported on a 1098-E. This is important because you may be eligible to deduct this interest on your taxes.
- Form 1098-T: Qualified tuition and related education expenses are reported by your college or career school using a 1098-T. These expenses may be able to be claimed as education-related tax credits.
Hacks and Tips You Should Know
This may all seem like a lot of confusing terms and information, especially with a looming deadline. Below, you’ll find a list of hacks and tips to help you on your tax-filing journey!
- Collect your forms and receipts throughout the year and keep them in one place in a filing system that works for you. This will avoid you having to find them when it’s tax time and make you less likely to accidentally lose something important!
- Check whether or not you have experienced a life event that changes your status for tax purposes. If you were married during the year, you will need to file as such, though whether to file jointly or separately will depend on your personal situation. If you had a child or gained a dependent, these will also affect your return.
- Ensure you explore all possible deductions and credits, including student loan interest, health insurance premiums, charitable donations, and homeowner expenses.
- Always file on time! As mentioned above, the filing deadline to submit your 2021 tax return and pay any tax owed is Monday, April 18, 2022. If you submit your taxes late, you are likely to get hit with a fine.
- Don’t throw away any documents for at least six years. Although there are some exceptions in special circumstances, you are unlikely to be audited by the IRS after six years. This means that you need to keep all receipts and forms for that period of time because you don’t want to be caught in an audit without any of your documents.