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.
Is This the Right Investment for You?
Apple is one of the world’s largest companies and a dominant player in the tech industry. There are 1.4 billion active Apple devices being used around the world, including 900 million iPhones, which is easily Apple’s most popular product. The company also makes iPads, Apple Watches, laptop and desktop computers, and Apple TVs. Finally, it makes billions each year from services, including taking a cut of every paid app downloaded from the app store.
With how important Apple products are in our day-to-day lives, it’s easy to see why somebody would be interested in buying Apple stock. Let’s take a closer look at how you can add one of the world’s best tech giants to your portfolio.
Before You Start
This is a good time to mention that individual stocks are risky investments that could easily go down in value. Although Apple stock has gone up an eye-popping 30.1% each year over the last decade, the stock does fall periodically. For instance, shares fell from $227.26 to $157.74 from Oct. 1 to Dec. 31, 2018. The stock has rebounded since, but still hasn’t surpassed the October high.
If the idea of investing in a stock and seeing it fall in value makes you uncomfortable, it’s a good idea to stick to safer investments. Although the stock market does tend to go up over time, it sometimes doesn’t. Apple, like most other technology investments, is generally regarded to be more risky than the overall market, too.
Some investors might be more comfortable investing in the entire stock market, or even the entire tech sector, rather than choosing Apple directly. Spreading the risk over hundreds of different companies can protect an investor if iPhones suddenly stop selling.
Setting up a Brokerage Account
To buy individual stocks you must first open an account with a brokerage that will serve as a middleman between you, the buyer of the stock, and the person who sells it to you. This is not a hard process, but it will likely take a little bit of time.
30 years ago, almost all stock trading was done on a face-to-face basis, or at least on the phone. You’d have to contact your broker and get them to purchase the stock on your behalf. Brokers charged high commissions for this service because there was no alternative. There are still some brokers who operate with this business model in 2019, but you’ll be hard-pressed to find them.
The much easier solution is to use one of the many online-only, self-service stock brokers. These companies do everything but give advice. They’ll track your account balances, show you your total returns, and even issue forms so you know what income to report to the IRS. You’ll be in charge of all buy or sell decisions, which will be executed either online or through a smartphone app.
Yes, you can buy Apple stock through an app on your Apple iPhone.
The first step is the application process. Be prepared to answer a lot of questions. The information requested will start out pretty basic before asking some personal questions about your total financial standing. The application form alone will likely take 30 to 45 minutes to fill out.
Many of the big banks offer their own online brokerage services, which makes the initial application process much easier. Remember, your bank already has a lot of your financial info on record already. They don’t need to confirm your address or Social Security Number.
Once your application is approved, the next step is funding the account. You don’t need a whole lot of money to get started. In fact, many online brokers will let you open an account before funding it. Transferring cash from your bank account over to your brokerage is as easy as paying a bill online. But be warned: it’ll take at least a couple of business days for the cash to end up in your account.
Buying Apple Stock
Once your brokerage account is all set up and you’ve transferred cash into it, you’re ready to start buying any stock listed on either the New York Stock Exchange or NASDAQ.
While every brokerage is a little different, they all essentially do the same thing. To buy stock you need to tell the brokerage exactly what you want to do and software will execute the transaction.
Say you put $10,000 into your account and want to invest approximately 10% of your portfolio into Apple shares. 10% of $10,000 is $1,000, which means you’ll be looking at buying five shares at today’s price, which is right around $205 per share.
You’ll need to locate the trading part of your broker’s website or app. This won’t be hard, since trading is one of the main ways your broker makes money. They want you to find this page.
Once in the trading page, you’ll have to input all the information needed to execute the trade. You’ll need to tell the site the stock’s ticker symbol (AAPL in this case), how many shares you want to buy, and your choice between a market and a limit order.
A market order will pay the going price for shares and snatch up the stock immediately, while a limit order will insist on getting a price equal to or better than a set number. If Apple stock is currently trading at $205.10, a market order would immediately buy at that price. A limit order for $205.00 would patiently wait until shares dipped to that level.
Once you have the information all filled out and you hit submit, your broker will confirm the transaction. Use this opportunity to ensure you haven’t made a typo somewhere. This is also where the commission for the transaction is disclosed. Once you confirm the transaction, it’s done. You’re the proud owner of a very small part of Apple.
The Bottom Line
This might seem like a daunting process, but it’s really not. Remember, millions of Americans are using online brokerages to buy and sell many stocks, not just Apple. The system is designed to be as easy as possible. You’ll be buying and selling like a fancy finance guy in no time.