File Like A Pro: 6 Tips for Doing Your Own Income Taxes

Filing your own income taxes can be an overwhelming process. As a freelancer who also happens to be a digital nomad, it can feel like even more of a burden, as you sort through your receipts, bank statements, and maybe a few spreadsheets before you even begin filling out that Form 1040 while on the road.

 

However, there are a few time-saving tips that can make the process a little bit less of a headache for you this year and for many years to come. Take a look below and take note if you’re one of those people who would rather spend more time doing anything other than your income taxes (aka me).

1. Do your federal income taxes before your state income taxes.

This is actually a necessity more than a tip. Your state income taxes will ask you to input amounts that should have already been calculated on your Form 1040, which is what you will file for your federal income taxes. In fact, most of the information requested on your state income tax return will simply be transferred onto your Form 1040. However, it’s important to note that while the process may seem redundant, there will be some state-specific deductions and credits that you will be able to apply to your return if you qualify. Furthermore, not every state allows you to take the exact same deductions and credits listed on your Form 1040.

2. Do your taxes early.

The earliest you can file your taxes is usually late January/early February. I recommend doing your taxes early so that you can see how much you owe and budget accordingly. For example, if you do your taxes during the first week of February and notice that you owe $1,800, but only have $1,500 saved up for your taxes, you can hold off on filing until closer to the April deadline and set aside some extra money from each paycheck until then to make up the difference. You might even have the option of applying for a six-month filing extension if you’re really in a bind.

3. Research what forms you’ll need beforehand.

Read through the Form 1040 first, then research what deductions you want to take and get the subsequent forms you’ll need together before filling out the form. This makes the filing process so much easier. There’s nothing worse than hitting a line on the Form 1040 for a deduction you’re considering applying to your return, then realizing you need to go and print out yet another form. (Note: I’ve outlined deductions freelancers are most likely to claim in my Taxes Q&A post.)

4. Plan for the next year.

While you’re filling out your tax return take note of deductions that you are not eligible for, but could potentially claim with some planning. For example, after going through the filing process one year, I noticed that if I donated a little more cash and non-cash contributions to charitable organizations I was already supporting that I could claim an itemized deduction that would be greater than the standard deduction I was already claiming. Making note of deductions you’d like to claim in the future can help lower the amount of taxes you have to pay, as well as dictate how to spend your income more tax-efficiently in the coming year.

5. Make copies of everything.

Make copies of every section of your return. I don’t care if you don’t have a scanner or copier and have to hitch a ride to the local library or use your employer’s printer when no one’s looking. It’s important that you have proof of your tax returns in case something goes wrong, such as the federal or local authorities not receiving your returns due to some mishap or if you have to undergo an audit. If you’re not into hard copies, at least scan your filled out forms and save them on your hard drive (and external hard drive!).

6. Keep copies of your tax returns from previous years.

Previous tax returns can serve as great points of reference when working through your filing for the current year. They can help jog your memory when you’re considering claiming a deduction that may or may not have worked in your favor in the past. They also tell your monetary narrative and can serve as good reminders of investments you’ve made in the past that have or have not helped you generate more income and grow your business.

 

Have a pro-tip for filing your income taxes that’s helped you in the past? Share it in the comment section below!

Buppie

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