It's Not Fun, but It Has to be Done Benjamin Franklin wrote a 1789 letter that states, “But in this world nothing can be said to be certain, except death and taxes.” Even at the United States’ early beginnings, federal taxes were a necessary evil to fund various public projects and administrative costs. Today, federal taxes serve much of the same purpose. While virtually no one likes to prepare and file their taxes, it is a necessity if you want to avoid fines and further hassle. It is no secret that preparing and filing your taxes is notoriously complicated. Many people lament that it should not be so difficult to pay the government. However, some of the complications allow people to save money if they discover specific tax benefits. Knowing how to file your own taxes may be a good option if your tax situation is relatively straightforward, or if you are willing to learn the process. Why Do You Need to File Your Taxes Every Year? The short answer is that federal law requires that most individuals file taxes annually. Income taxes are assessed every year based on your income earned during that period. You then pay a percentage of that income to the government, less any deductions, adjustments, or credits that you qualify to receive. If you do not file (and pay) your taxes, then you may be assessed penalties and interest. The Internal Revenue Service (IRS) can even go as far as garnishing your wages and repossessing your property if you do not file and pay as required. The Benefits of Filing Your Own Taxes If you are one of the 43% of Americans that are doing your own taxes, you are certainly not alone. Roughly 53 million people prepared and filed their own taxes in 2018. There are many benefits to filing your own taxes, including: Saving money: Hiring a tax professional is expensive, and many people can prepare and file their returns on their own, completely free of charge. Control: Some people like knowing the exact information that is included in their return and being able to control the data, and for some, knowing precisely how the numbers work out, is comforting. Gain helpful information: When you prepare your taxes, you can see what items saved you money this year or which issues you should address so you can save money next year. While filing your own taxes is complicated, it can be beneficial under the right circumstances. There are several programs online that walk you through the process to help ensure you are taking advantage of all of your available deductions and credits. The Drawbacks of Filing Your Own Taxes In addition to the benefits, there are also some disadvantages to filing your own taxes. These include: Time and effort: Preparing and filing your taxes takes time and work You have to sift through financial information and deal with concepts that you may not understand well. The process can be frustrating and take a considerable amount of time. Error risk: If you do not completely understand how your taxes work, you run the risk of making a mistake because of misconceptions. If that happens, it could lead to underpayment and audits down the road. Questions: Even if you use a tax preparation software, you may still have questions that will remain unanswered unless you do significant research or reach out to a tax professional. For some people, the risk of having a substantial error that triggers the IRS’s attention is enough to scare them away from preparing their own taxes. Preparing for Filing Your Taxes When you begin work on your taxes, you should have information gathered throughout the year. Some of the most common items that you will need include: Social Security numbers for you, your spouse, and any dependents Information about wages, such as W2s or 1099s Investment income information Documents that represent any other source of income Information regarding adjustments to income, such as student loan interest paid, IRA contributions, and health savings account contributions, just to name a few Information regarding potential credits, including, for example, child care expenses, education expenses, or retirement savings contributions Data about any tax payments that you may have made throughout the year Keeping good records will help make tax preparation easier at the beginning of the year. [youmaylike] The Basics About What You Can Claim When Filing You must pay income taxes on all your income earned throughout the year. However, that income is reduced by a few things. The further you can reduce your taxable income, the less you tax you will pay. There are three general categories of tax reduction methods: Standard or Itemized Deductions Everyone can claim either the standard or itemized deductions. Standard deductions are a set amount that is based on your filing status. Itemized deductions are based on actual expenses that you incurred throughout the year. You can choose to use the higher deduction. The higher the deduction, the less tax you will have to pay on your income because your income decreases on paper. Itemized deductions include things like medical expenses, state and local tax payments, and home mortgage interest deductions. Itemized deductions will only decrease your income by a certain percentage, or up to a specific point. Adjustments Some adjustments to your income may also be available. These include things like paying student loan interest or alimony. Adjustments are more valuable compared to deductions because they decrease your income dollar for dollar. Credits A credit decreases your taxable income as well. Some credits are refundable while others are not. For example, you get a child tax credit simply for having children that qualify for that credit, but that credit will not be paid out to you if you do not have any tax obligations. On the other hand, the Earned Income Credit, which is available for low-income filers, will be refunded to you even if you do not owe any taxes. There are a wide variety of deductions and credits available. Take a look at the federal forms and related schedules to determine whether you might qualify for any of these. How to File Your Own Taxes If You Live Overseas If you earned income in the United States as a U.S. citizen or resident alien, you likely need to pay taxes on that income. This is true even if you live overseas. You can still choose to e-file or mail your tax return to the IRS once you have it prepared, just as if you physically lived in the United States. In some cases, you will be taxed on the income that you earned throughout the world. However, you may be able to deduct a portion or all of the revenue that was not made in the United States in some circumstances. Filing Online The IRS offers an online filing option that is free for individuals that have an adjusted gross income below a specific threshold. Generally, your income must be below $66,000 to qualify for this service. You can also file online by using a commercial tax preparation software. Examples of this type of software include: H&R Block TurboTax TaxCut TaxSlayer There are many programs available that will file your taxes for you, often for a fee. Knowing how to file your own taxes can be a great way to save money, but it can be tricky as well. If you want to file your taxes yourself, be sure to read the form instructions thoroughly and get familiar with various tax saving opportunities before you begin preparing your return.
Take Control of Your Finances
Managing your finances can be quite hard at times. Life is full of expenses and financial surprises. It’s not always so simple to make sure your money is being put to use optimally. This is especially true if you have work-related expenses or often need to travel for work, both of which are very common in the modern economy.
Fortunately, there is now an app for everything. This is true of budget apps as well, and there are many different budget apps available. Many of these budget apps are also meant for people in specific situations. These people include business owners, career professionals and various kinds of entrepreneurs. If you’re looking to get your finances under control, then budget apps are the way to go.
This article will help you find the best budget app for you.
For Personal Use
When it comes to personal use, there are some apps that stand out for their generic and simple applications. These apps will provide you with intuitive tools you can put to use to get your personal finances in order.
You Need A Budget (YNAB)
YNAB is the best budgeting app on the market when it comes to properly tackling debt. When it comes to budgeting, good financial advisors will advise you to make your money work for you. YNAB takes this idea to heart — the app’s greatest strength is that it applies this idea to itself in a way the user can see and appreciate.
With YNAB, each dollar you have is a worker with a job it needs to get done. Each dollar has a specific task, starting with debt payments, but including everything from bills to gas. This is always easier said than done, which is why the app gives you a goal to reach and provides positive reinforcement that’ll encourage you to carry on until the goal has been reached. The app comes with a free trial, but you’ll have to pay a monthly fee if you want to keep it.
If you’re looking to track your expenses, Wally is the best budget app for you. While Wally won’t be as effective at helping you pay off debts or come up with a larger financial plan, it’s a great choice for controlling expenses.
Wally does what any great budget app does for you: it balances your income and your expenses. In a time when finances are growing more complicated, Wally keeps things simple and helps you learn about where all your money is going. If you’re barely keeping any of your paychecks and aren’t completely sure as to why, Wally will provide you with as clear an answer as you’ll be able to find. The app is free to use, and it’ll help you see exactly where your money is going.
Mint is a free budget app that boasts a wide array of applications and excellent reviews across the board. The Mint app syncs to your bank account and tracks all incoming and outgoing transactions.
Mint can be used to create a personal budget, track your bills and even track and report your credit score. The app can even provide alerts to help make sure you never miss a bill again. In the end, Mint’s strongest point is the fact that it can work with everything important to your financial life. This includes your bank account, credit card accounts and even your retirement savings accounts.
The First Winner Is…
Mint. This is undoubtedly the best choice when it comes to personal finance. Have you considered hiring a personal financial advisor? Well, Mint is the next best thing, as it will handle almost everything for you, and it will even scold you for spending over your budget. Did we mention that it’s free to use?
For Business Use
When it comes to business, many of the best personal budget apps won’t cut it anymore. Business owners and entrepreneurs of all forms are playing a completely different game when it comes to their money. Fortunately, there are also some great apps for managing your business finances.
For Freelancers: Tycoon
Tycoon is an excellent app for freelancers of all kinds. Tycoon was created by Jess Perez, the supermodel. Perez had made note of the fact that like most freelancers, models are often paid far later than they were expecting. Models often also have difficulty managing the many tasks they have at any given moment. Tycoon was Perez’s response to this problem.
Tycoon is tailored to the needs of self-employed individuals, and as such, it tracks all of the things they need to know. This includes payments that are set to come in, payments that have come in and payments that are now past due. Tycoon knows what freelancers and various self-employed individuals are kept up at night thinking about, and provides a well-packaged solution.
For Small Business Owners: Toshl Finance
Toshl Finance is a great budget app for small business owners looking to handle their expenses. The app can monitor expenses, filter budgets by various metrics and even export files including PDFs and Microsoft Office documents. The app also supports most of the world’s currencies and offers cloud syncing.
Budget apps may not be necessary for everyone, but if you can use some extra help, they are worth a shot. Any of the above apps can be found on the App Store or Google Play, and are easy to get started with.
While these apps are great for the purposes we have laid out, there are other apps with more niche applications as well. Regardless, budget apps are a great psychological tool for convincing your brain to take control of your finances.