There are few times that inspire more anxiety and stress than tax time. The tax code has a myriad of rules that can test even a seasoned accountant. Annual changes can also make it harder to stay on top of your taxes.
But filing your taxes doesn’t have to be a dreaded event. Here are some tips you can use in January and February to set yourself up for success, before you even start filling out any forms.
Get all your ducks in a row
The first step to filing is to make sure you have all the paperwork you need. Make a list of your income sources over the past year: paid internships, part-time or full-time jobs, freelance gigs — anything where you received a paycheck. You will need to report income from all these sources.
If you have a salaried position, you should receive a W-2 from your employer that reports your annual wages, plus the amount withheld to pay federal and state income. If you do freelance work, you’ll get a 1099 form. If you interned over the past year, you’ll get either a W-2 or 1099 — it varies by internship employer. Expect to receive these forms by early February.
At the same time, gather any relevant tax docs you held on to — like that receipt for the couch you donated to charity or the statement from your college loan provider about the interest you paid the prior year.
Once you receive tax documents for all your jobs held in the past year, double-check the forms and make sure that all the information and numbers (such as your Social Security number) are correct. Do this now so you aren’t scrambling in April, and if you find an error, take steps to correct it.
While you have all your documents and receipts out, get organized. Start a folder to corral them, or scan and save everything to the cloud. The IRS has up to seven years to audit your returns, and it’s vital to have proof of all deductions until then.
Plan your attack
Now that you have everything you need to file your taxes, do a little research on how, exactly, to file. There are generally three methods:
- Use the IRS Free File. If you make less than $64,000 per year, check out the IRS’s Free File system. According to the site, 70% of all taxpayers — 100 million people — can file their taxes for free using this software.
- Use DIY software. Online tax software like TurboTax walks you through your tax return, asking simple questions about your life (like “do you have a student loan”), and putting the information on the right forms for you. All filers can save up to $15 on TurboTax federal products. Learn more.
- Go to a tax professional. That’s right: a real, live person to help you file your taxes. If your taxes are complicated — like you’re self employed and pay other contractors, you rent a room, or your parents gifted you some stock shares that generate Schedule K forms — it can be mighty helpful to go to a tax professional. It’ll cost you, but the peace of mind of having your taxes expertly (and easily) filed can be worth it.
Now that you’ve gathered your paperwork, checked for errors, and researched filing methods, you’re likely ready to get going! Don’t let us stand in the way: Take the next step to learn about deductions and credits, how to file your taxes, and where to get help.