This “THE DO’S AND DON’T OF FILING YOUR TAXES” post is sponsored by TaxAct but as always all opinions are my own.
The deadline of filing your taxes is upon us y’all. It’s April 15th this year in case you didn’t know. I’m always so fearful of making a mistake on my taxes so I’m so grateful for programs like TaxAct that catch little mistakes and walk you through it all step by step. I’m teaming up with them this year to help offer as much guidance as possible while filing your taxes and tell you exactly what you need to do. Check out this post on tips to maximizing your tax refund and lowering what you owe.
And if you are intimidated by the time it takes to file your taxes, I can assure you it’s not as bad as you are imagining! TaxAct makes it easy to file your simple Federal return in under 10 minutes. See how you can here!
So when filing our taxes we all know the basics of when to file etc. but do you know what not to do? Thankfully the pros at TaxAct WANT to help you not only get the most financial benefit but also stay out of trouble with the do’s and don’ts of filing your taxes.
DON’T rely on all of your numbers from last year. Things change and even the slightest adjustment can throw a major wrench in your return process.
DON’T wait until the last minute. Have you ever noticed when you’re rushed you end up forgetting something important? Since you’ll end up paying penalties along with interest on top of your unpaid tax bill if you file late, you’ll definitely want to file your returns on time every year.
DON’T forget to claim all your possible deductions. See below for some helpful info TaxAct provided.
DON’T forget about claiming all sources of income. Along with your day job wages, you have to report all other earnings, such as your capital gains or other miscellaneous income like PayPal etc.
DO keep all your files, receipts and tax information organized. You panic when you scramble so it’s better to be prepared. I’m not saying you have to be meticulous with it (although it wouldn’t hurt) but it’s definitely a good idea to put it all in a filing folder or drawer for easy access.
DO consider e-filing your taxes. When you file online it can save you time and effort. TaxAct runs all the numbers for you. It’s also cheaper and safer than filing it through the mail. (Plus it gets your return to the IRS faster so you’ll get your refund quicker if you’re expecting one back)
Ok there are the ‘THE DO’S AND DON’T OF FILING YOUR TAXES’ now let’s move onto the Q&A answers…
Some popular questions during our Q&A with TaxAct:
- Shouldn’t I hire a CPA for small business? It’s so itemized.
You can hire one, but it’s certainly not necessary. Online DIY tax software, like TaxAct, develops software specific for small business owners too. No matter how your business is structured (i.e., an LLC or a C-Corporation), their software can help you itemize all of your deductions and guide you through the entire filing process step-by-step. It’s a lot like using a CPA, but all from the comfort of your home.
- Do I HAVE to keep all receipts?
Yes, it’s very important to keep all of your receipts if you want to itemize your deductions. It’s best to have them in case you ever need to prove an expense on your return to the IRS.
- What all can I claim for small business expenses?? I don’t think I claim nearly what I could
There are many business expenses you can claim. A few examples include travel, equipment, rent on business property (like an office), business supplies, contract labor (for example, if you hire a graphic designer to create your logo or a web developer to build your website), utilities, insurance coverage, advertising, and your home office.
If you’re a freelancer or independent contractor, TaxAct’s Self-Employed+ product has a featured called Deduction Maximizer, which is designed to help you take advantage of all the deductions available to your specific line of work. Their small business solutions also help ensure you don’t miss out on any deductions.
- With the new 199A deduction, do self-employed individuals still get 1/2 credit back for self-employment tax paid?
Yes, you can still deduct ½ of your self-employment tax on your return. The new 199A rules did not change that. That said, it is a deduction and not a credit.
- What are the rules around having a room designated as a home office?
To be considered a home office, the area must be exclusively and regularly used for your business. It also must be your primary place of business or a separate structure used in connection with your business. There are no restrictions related to the location, size or construction of the space.
The BIG questions here for everyone! Tax Breaks and Write-Offs.
- What are the biggest tax breaks I’m potentially missing?
It all depends on your personal situation. It’s hard to say what you could be missing without knowing more about your personal and financial life. For instance, if you have children or any other dependents, you may qualify for the Child Tax Credit or the Child and Dependent Care credit, which are available to help offset some of the costs of having children.
Or depending on your income level, you could qualify for the Earned Income Tax Credit. Many people tend to not be aware they qualify for that.
If you own a home, you can write off your mortgage interest and property taxes.
There are so many deductions and credits available. That’s why it’s awesome that TaxAct’s software walks you through all of the options so that you’re sure to not miss out on anything.
- Can I write off home improvements?
The short answer is no, you can’t write off home improvements. However, home improvements can have a tax benefit if you sell your house later on. But, that all depends on the type of home improvement.
If your improvements add value to your house you can add the cost to your house’s tax basis. That includes things like an addition on your house, adding a swimming pool or a new roof. The cost of home repairs, on the other hand, can’t be added to your tax basis. That includes repairs like fixing a gutter, painting a room or replacing a window pane.
- Can I write off uber/lyft used for work?
Yes. If you are self-employed and used Lyft or Uber on a business trip, you can write off that expense.
- Can I write off meals if I go to dinner and we discuss business?
Yes, you can write of 50% of the cost of the meal if it was strictly for business purposes.
- Can I claim clothing?
If you are self-employed and your line of work requires a specific uniform or type of clothing, you can deduct the cost.
If you are a traditional employee, however, and your job requires you to wear a uniform, you can no longer deduct the cost.
- Can I claim gas and mileage?
If you are self-employed, you can write off the cost of gas or mileage on your car when used for business purposes. You can’t deduct both.
When it comes to deducting expenses related to your car, you can either deduct the actual expenses, which includes things like gas, oil changes, insurance, etc., or you can choose to deduct mileage. If you choose to deduct your actual expenses, you must keep receipts of all the costs. If you choose to deduct mileage, you need to keep a record of the number of miles you drive for business and the reason for the trips
- What are some rules around donations and the tax implications?
All charitable donations, whether they are monetary donations or tangible gifts, lower your taxable income as long as they go to qualified, tax-exempt organizations.
The federal government allows you to deduct charitable donations to a qualified organizations if you don’t benefit or get anything in return for the donation. Among organizations eligible to receive tax-deductible charitable donations are churches, temples, mosques or other religious organizations; nonprofit schools or hospitals; the United Way, Boy Scouts of America, Girl Scouts of America, Boys and Girls Clubs of America; and veterans groups and organizations, including the Salvation Army, American Red Cross, CARE and Goodwill Industries.
You also can deduct donations made to federal, state and local governments for public purposes — for example, donating to a fund to rehab a public park. Any expenses you incur as a volunteer for a qualified organization are deductible too.
You can find out what organizations qualify by using the IRS’ Tax Exempt Organization Search tool.
Additionally, while donations to qualified charitable organizations are deductible, donations to individuals are not. If you donate money to help a friend or member of your church purchase a new car or pay for a surgery, that donation isn’t tax deductible.
Donations to most foreign organizations, civic leagues, labor unions, chambers of commerce and other social groups also don’t qualify. And neither do dues paid for country club memberships or fraternal orders or donations you’ve made to political organizations or candidates.
To claim the deduction, you must file Form 1040, the form you use for an individual or joint income tax return. You also must itemize your deductions. With any charitable donation, make sure to keep a record of the contribution, especially the tax receipt from the charity. If you make a non-cash donation, you may need to get a qualified appraisal to prove the value of the deduction you’re claiming.
Family
- What all can you write off with kids?
If you have children you may qualify for the following deductions and credits:
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- Child Tax Credit (CTC) – This credit only applies to dependents who are younger than 17. It is worth up to $2,000 per dependent in 2018 (twice as much as in 2017), but your income level determines exactly much you can get. It also now includes a refundable portion of up to $1400. That means even if your tax bill is $0, you can still get $1400 in the CTC credit back as a refund.
- $500 Credit for Other Dependents – This is a new credit for 2018 and was enacted by tax reform. It allows tax filers to claim a credit for dependents in their household that don’t meet the definition of qualifying child. For instance, if you have children who are in college or other dependents living in your home, you can now claim a $500 credit for each.
- Child and Dependent Care Credit – This credit is available to help offset some of the costs (although a very small portion) associated with care of your child. It’s worth 20 to 35% of some or all of the dependent care expenses you paid. The percentage you use depends on your income.
- Adoption Tax Credit – For adoptions finalized in 2018, the Adoption Tax Credit is worth up to $13,810 per child. The credit is non-refundable, however, which means you only benefit from the credit if you owe federal income taxes when you file.
- Can I claim everyone living in my home as a dependent?
Yes, you can claim anyone as a dependent as long as you provide at least half of that person’s total support for the year, including food, shelter, clothing, etc.
There are different rules related to claiming your child versus another individual as a dependent. For instance, if you want to claim an individual that’s not your child, that person cannot have a gross yearly income over $4,150 or be claimed as a dependent by someone else.
- Is it more beneficial for my spouse and I to file together separate?
Generally speaking, (keep in mind all tax situations are different!) married filing jointly results in a lower tax liability. The IRS also encourages married couples to file joint returns.
There are some unique circumstances where filing separately might make sense, however. For example, if couples have very similar incomes and little to no deductions. Couples that are also just starting the divorce process may opt to file separately.
Unfortunately, you can lose out on a lot of tax deductions and credits by choosing to file separately.
Other General Questions
- What are the chances of being audited!
Generally, your chances of an audit are low. And the other good news is that a large portion of audits are handled by mail. That means many of the individuals who get audited can resolve the issue fairly easily.
Regardless of your chances, however, it’s always best to be as accurate as possible when reporting your income and expenses on your tax return. It’s also important to keep all of your tax documents and receipts so that you can back up any of your claims should the IRS ask.
TaxAct offers an audit defense service through its partner Protection Plus. Should you ever need audit assistance, the service will help you determine the best course of action and provide
- What are the major tax changes I NEED to worry about?
One of the biggest changes under tax reform is the increase in the standard deduction. Each filing status changed for 2018 returns. If you’re single, it increased to $12,000 (previously $6,350 in 2017), and if you’re married, it increased to $24,000 (previously $12,700). That change may make it no longer beneficial for you to itemize your deductions. If the value of your itemized deductions are not higher than the standard deduction, you can skip itemizing and simply claim the standard deduction.
The $4,050 personal exemption deduction was eliminated for 2018 returns. That means you can no longer claim it for each dependent in your household to reduce your taxable income.
Your state and local tax deduction is now capped at $10,000 regardless of income level. That means you can only deduct up to $10,000 in state and local taxes on your return. Previously, the deduction was unlimited.
- If you make under a certain amount do you have to file taxes?
If you are 65 or younger, you have to file a return if you earn $12,000. If you earn under that amount, you are not required to file a return. However, you are still eligible for a potential refund, so it’s likely in your best interest to file a return regardless of how much money you earned during the year.
- What if I can’t pay when I file because I don’t know what I’ll owe?
After you finish preparing and filing your tax return, you should know how much you owe in taxes or how much you’re getting back in a refund. If you use tax software, like TaxAct, to file your return, the software will make your tax outcome very clear.
If you owe and can’t pay the bill before the tax filing deadline, which is April 15 this year, the IRS does have payment plans you can elect to use. It’s always best to file your return by the deadline even if you think you can’t pay because you’ll have to pay a penalty if you don’t.
- How fast do you get your tax refund?Generally, the IRS processes federal returns that are e-filed and have refunds designated for direct deposit within 21 days. If you choose to paper file your return or receive your refund via paper check, that process can take longer. The processing time of state returns varies by state. You can check the status of your federal refund here and the status of your state refund by visiting your state’s Department of Revenue website.
How do I figure out my tax bracket?
First, one thing to keep in mind is that your tax bracket includes the tax rate you pay on your highest dollar of taxable income. It is not the tax rate you pay on all of your income after adjustments, deductions, and exemptions. You can use this TaxAct’s Tax Bracket Calculator to quickly determine your tax bracket.
Can you file an extension?
Yes, you can file a tax extension if you feel you need more time to file. For instance, if you’re still waiting to receive a few financial documents you need to file, you may want to consider filing an extension. Keep in mind that does not void you from having to pay your tax bill (if you have one) by the tax filing deadline. You still must pay your tax bill by the deadline to avoid a late payment penalty. The tax extension deadline is Oct. 15, 2019.
How long do I have to keep all my receipts and tax documents?
For the majority of tax returns, it’s best to keep your tax documents and receipts for three years. If you have a more complicated situation, like claiming a loss from a bad debt deduction, you may want to keep your information in a safe place for seven years.
How do I know which form to file?
All individual tax filers need to file Form 1040, U.S. Individual Income Tax Return. But depending on your tax situation, you may need to file additional tax schedules. And that’s where it can get a bit tricky. The good news is DIY tax software, like TaxAct, will ensure your information is reported on the appropriate forms. All you have to do is answer some questions, and the software will populate the forms for you.
How far can you go back if you realized you were owed more? Or didn’t put your mortgage interest on your returns for years?
Generally, you have three years from the due date of the original return. This means you can file an amended return for tax year 2015 if you file by April 15, 2019. You can no longer file a return for any tax year that’s earlier than that.
So I have just recently moved to the US from Europe for my husband’s job. So I know very little about taxes in the US. Back in Hungary, as a blogger when doing paid posts I had to register as a self-employed, pay a monthly fee, buy a special block of paper to invoice the companies I’m working with and report all the earnings at the end of tax year. I imagine it is similar here. But I just can’t figure out where to and how to register for a similar status here as an influencer? Or do I even have to? Can I really just print an invoice I design in the US? And my husband’s company does his taxes… how do I let them know my earnings?
First, start by reviewing IRS Pub 334. That will give you a good understanding of the federal tax laws applicable to small businesses and self-employed taxpayers. As an unincorporated small business, you do not need to register with any federal agency, like you did in Hungary. You may need to apply for an EIN (employer identification number) if you pay wages to employees. And you should check your state’s revenue department requirements to determine if a business registration is required at the state level.
You can totally just print an invoice that you design. There is no federally mandated invoicing requirement in the U.S. as long as your invoice provides the necessary information for your client.
Lastly, you should give a complete record of your earnings and business expenses to your husband’s company when they go to file your taxes. They’ll compile the information on Schedule C, which is a tax form used to show your profit or loss. If you don’t have good records, review the information in IRS Pub 583. That will tell you what information is required to complete your federal taxes. Also be sure to include records of any estimated tax payments you made throughout the year. For more information on estimated tax payments, visit this TaxAct blog post. Their blog has a ton of information to help those self-employed to confidently manage their taxes.
I hope this information with the Q&A and the do’s and don’ts of filing your taxes helps you this tax season. Please reach out if you need any guidance and check out TaxAct to see how you can earn up to an additional $100.
