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Everyone Who Does Taxes For The First Time Should Know These

Everyone Who Does Taxes For The First Time Should Know These

Like Voldemort from Harry Potter, the word “taxes” should not be The Thing That Must Not Be Named. We should not live in fear of the 15th of April like it’s some plague or judgment day. True, it may feel intimidating the first time you are forced to sit down and complete your taxes on your own. We’ve all been there and, yes, felt your pain.

However, taxes shouldn’t be the bane of your existence. With some planning and premeditation, doing your taxes should be manageable. After all, however you look at it, you will have to file your taxes every year. So do it right and follow these 10 need to know tips to complete your taxes without hyperventilating.

1. Nobody will remind you to do them.

Throughout the year, you should be saving pay stubs, tax returns, and other files and documentation. Let’s face it, filing taxes is not a one and done deal; it’s an ongoing process. Therefore, the government is not going to send you a little friendly reminder letter in the mail like your dentist does for an upcoming appointment. As soon as you begin to receive W2s from your employer, you should being filing your taxes. Don’t wait until the last minute, unless you want to be sweating bullets.

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2. You need to double check everything.

Okay, the truth is, taxes do take a while in order to be completed properly. It requires focus, retrieval of papers and documentation, and reading the directions carefully. At times, the forms may seem a bit repetitive, but make sure you use the examples and directions to help you complete each section. Also, double check everything, especially your name and your math. This not only saves you from a load of extra paperwork, but it will also help ensure that you don’t get flagged for tax fraud.

3. Have your papers organized before you start.

Find a filing and organization system that works for you. Don’t expect to just bring a heap of papers along with you to sift through and have it done in a half hour. Instead, make sure you are keeping your information organized throughout the year to make filing your taxes a lot less stressful. Try using a hanging filing folder system with labeled tabs of all of your paperwork. Or, invest in a filing cabinet or accordion folder system. Just make sure to be consistent. The IRS suggests keeping your records for seven years before discarding any documentation. With all that paperwork, don’t let your files become an unorganized heap.

4. Save some money to file them early.

Set aside money and file early just in case you may owe a lot of money to the IRS. This way, you won’t be blindsided by owing any unexpected large sums. Also, you can save money and get more on your return by filing any charitable contributions and avoid accrued interest on your taxes. Plus, you’ll receive your refund faster. Just make sure you have enough budgeted for these extra costs and money needed if you choose to seek out an accountant or program to file your taxes for you.

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5. Online tax programs don’t know everything.

It’s great to file online through step-by-step programs like TurboTax or TaxAct. Yet, they don’t always know about your individual tax exceptions and needs. Every person is different and you may have some questions that are beyond what the program can provide for you. Save some money and find an accountant who can help you through your unique tax filing. A tax preparer works specifically for the IRS and will cost between $150-$450, depending on your situation. Or, you can use a retail tax company like H&R Block for quick and easy filing. Just make sure you invest your time into finding one that suits your needs. It will be worth it in the long run.

6. Filing jointly is a little easier.

If you are married, filing jointly is a great way to guarantee the largest standard deduction from the IRS each year. You can also qualify for many taxes credits, including the American Opportunity and Lifetime Learning Credit, and the Earned Tax Income Credit. Plus, you only need to submit your taxes once together.

Ultimately, it’s better to file jointly. According to Turbo Tax, “In 2013, married filing separately taxpayers only receive a standard deduction of $6,100 compared to the $12,200 offered to those who filed jointly.” Therefore, if you are married, look to filing jointly to get the best tax breaks.

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7. File as early as possible if you need financial aid.

If you file early, you have the best potential of receiving the maximum amount of financial aid. The IRS makes this easy to do, because there is a link from the FAFSA form to the IRS, meaning you don’t have to provide your tax information by yourself. Be proactive, invest in your future, and get the most out of your education and your tax money.

8. You can submit corrections if you make a mistake.

Remember that we are only human and “to err is human”. So, you flubbed up a number or missed a step in filing your taxes. Something looks off. Don’t freak out; a 1040X file is your saving grace. It’s important to make your corrections rather than wait for the IRS to find them. A simple mistake typically won’t give you a large penalty, but it can cause accrued interest on the correct amount. Just know that it’s okay if you need to make a change.

9. You can write off student loan interest.

You can get a tax break and deduct $2,500 or the amount of interest you paid on your student loans. It’s considered an adjustment to your income, so you don’t have to itemize all of it.

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See what qualifies as a student loan adjustment and enjoy the fact that all of your money spent on your education is to good use and can help with your tax break.

10. You can credit your refund to next year.

Don’t always think that you have to spend your refund cash on anything right away. Instead, use it as an investment and put your money in a separate account in case you owe money next year when filing taxes. Or, you can place this money in a retirement fund and receive more money off next year’s income tax. The choice is yours, just choose responsibly.

Take a deep breath.

When you invest the time in filing your taxes and prepare all year, you really are investing in yourself and your money. If you want something done well, do it right. If you are still unsure about how to approach taxes, a good bet is to spend the money and seek someone who knows what’s best for you and your interests. Don’t be overwhelmed by the “big” 5-letter word; taxes aren’t that scary, as long as you don’t procrastinate.

Featured photo credit: Tax/401(K) 201 via flickr.com

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Kayla Matthews

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Published on September 17, 2018

How Being Smart With Your Money Leads to Financial Success

How Being Smart With Your Money Leads to Financial Success

Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

1. Avoid being “penny wise but pound foolish”

It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

2. When you want something big, wait

Impulsivity can get you in trouble in most aspects of life. Finances are no different.

It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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So, you get the itch.

You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

Here’s where you have to take a step back.

Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

The impulse faded. And you just saved yourself a ton of money.

3. Live smaller than you can afford

You finally get that big raise. And you want to celebrate – and why not?

You’ve been looking forward to this forever. And after all, it was all due to your hard work.

That’s fine, splurge a little. However, make it a one-time deal and be done.

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Don’t get caught in the trap that just because you’re now making more money, you should spend more.

Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

4. Practice smart grocery shopping

Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

Create a grocery budget

Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

Make a list… and never deviate

Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

These impulse decisions will lead to overspending, which will derail your grocery budget.

Eat before going grocery shopping

It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

This makes it much easier to stick to your grocery plan.

5. Cancel your gym membership

Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

The average gym membership costs around $60 per month. That’s $720 a year.

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Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

It’s baby steps… And baby steps can start now!

I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

Featured photo credit: Unsplash via unsplash.com

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