What Should You Know About Doing Your Taxes?

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For some people, the new year comes with a certain type of dread: January often means starting to work on filing taxes for the previous year. Filing taxes has a reputation as a confusing and daunting task, but it doesn’t have to be so hard. With several resources and services, you can file your taxes more easily. Learn more below about what to know as you do your taxes.

Get your income forms within the next month

If you’re an individual filing a tax return, you should file Form 1040. Before you file this form, you’ll need to determine your tax filing status. If you’re married, in a common-law marriage, or separated, you can file jointly with your partner. If not, you must file as a single taxpayer. Next, you’ll have to gather your financial records, such as your Form W-2 for any jobs for which taxes are deducted from your pay or your Form 1099 for any freelance work. These forms give you financial details necessary to include on your federal and state tax returns.

If you have to make estimated tax payments alongside your tax return because you did not pay your January 15 estimated tax installment, you may choose to file your income tax return using Form 1040 by January 31 instead of the usual April 15 deadline. Doing so avoids possible quarterly tax late penalties. However, if you cannot file and pay your taxes by this date, you can still file and pay your tax by April 15, though penalties may result.

Most people receive their 1099 and W-2 forms by January 31. However, if you don’t receive your forms by this date, you can ask your employers and clients for these forms.

Watch for healthcare tax forms in the mail

If you bought medical insurance through the marketplace in 2020 and received premium credits, you’ll need to file Form 8962 and Form 1095-A with your federal income tax return. Both these forms will show whether you used more or less premium tax credit than you qualify for. 

Start preparing now

Officially, Tax Day is April 15, but it’s never too soon to start preparing. Depending on your situation, it may be beneficial to hire an accountant to file your taxes. If you have a business or you’re self-employed, it can be especially important to hire an accountant so you don’t make a mistake that could later prove costly. However, not everyone needs an accountant – for example, if all your income is reported on one W-2, your employer covers your health insurance, and you have no investment accounts, your taxes may be simple enough to do yourself.

Watch out for deadline shifts

In response to the COVID-19 pandemic, the government pushed Tax Day 2020 back to July 15, 2020 from its original April 15, 2020 date. Even in less exceptional years, the April 15 tax deadline isn’t always set in stone – it can be moved by a day or two if April 15 ends up being Saturday or Sunday. This year, Tax Day is on a Thursday, and so far, there are few indicators of a potential extension. That said, an extension similar to 2020 remains theoretically possible. Whether or not an extension occurs, it’s best to start filing your taxes now so you can have an easier, stress-free tax filing experience.

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