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.
What to Know Before You Apply
When used properly, small business loans can be a great way to improve your business’s situation. They often have less stringent requirements than other kinds of loans, as well. Regardless, small business loans are worth looking into if you’re a small business owner looking to grow your business.
In this article we’ll go over how to get a small business loan and what to take into consideration.
What Is a Small Business Loan?
Small business loans are loans that provide one of several forms of business funding. These loans are typically used to start a business or to make major purchases of equipment, real estate or anything else meant to be used for business purposes.
One such example would be 7(a) loans regulated by the Small Business Administration agency of the American Government. 7(a) small business loans are all guaranteed by the Small Business Administration agency. This allows lenders to offer flexible terms and lower interest rates than what you’d receive with most other loans.
Because of the way small business loans are regulated and offered to businesses, small business loans offer a great option for business owners who want to stimulate their business without risking too much debt.
So, Why Would I Need One?
If you are looking to start a new business or expand an existing one, there are few ways to do it on your own. If you’re already wealthy, or you have assets you could sell, that would be one way to finance a new business. But even if you already did have the money you need, small business loans offer you an option with far less risk, even when compared to other kinds of loans.
What Do I Need to Apply for a Small Business Loan?
Specific requirements may vary depending on the lender, but you can expect to be asked for certain things regardless of where you’re trying to get your loan. You will typically need to bring:
- Photo ID
- Business licenses
- Personal and business income tax returns
- Personal and business bank statements
- Income statements
- Articles of incorporation
- Proof of relevant managerial or business experience
Some lenders will also ask for a financial plan for your business if they perceive you as having a limited operational capacity.
How Do I Apply for a Small Business Loan?
Applying for a small business loan is quite similar to applying for a normal one, just with more steps and more specific requirements. In any case, you’ll follow roughly the same process regardless of which lender you choose.
First, make sure you’re eligible for the specific loan you are looking to get. The lender you go to should have all of the necessary information listed on their site. If you want to make sure you know exactly what you need, give the lender a call.
After that, you need to choose where you’ll get the loan and which loan you’ll apply for. The Small Business Administration agency lists several kinds of loans, but in most cases, you’ll go for the standard 7(a).
Once you’ve chosen which kind of loan you want to apply for, you’ll need to choose your lender. The Small Business Administration doesn’t give out loans, they just work with lenders throughout the loan process. Each lender will have their own ideas and metrics that they’ll apply on you. While the Small Business Administration lists the basic requirements for small business loans, they don’t do much else.
Your choice in the lender will affect everything. You’ll need to find a lender that offers you the program you need, while also making sure you meet their credit score requirements. Some will charge you a down payment, while others don’t. Likewise, customer service, collateral requirements and waiting times vary greatly from lender to lender.
Once you’ve chosen your lender, you’ll need to gather all the necessary paperwork and fill out an application. From here, you can expect more paperwork, after which your application will be processed.
What Should I Expect from the Application Process?
If everything is in order with your paperwork, there shouldn’t be any major obstacles to receiving your loan. Of course, each lender will have varying opinions on you and your business. You should always expect a level of service that is typical of the lender you chose.
The main exceptions are cases where they don’t believe your business plan is rock solid. In this case, they may get you to do more paperwork (write a financial plan), but otherwise, it’s all just about following the same processes.
Of course, if you’re looking for less stringent loan requirements, you can look to places other than Small Business Administration loans. Just be warned that if you do, you can expect worse interest rates, worse terms and perhaps even down payments. Despite this, the upfront hassle will be easier to deal with.
How a Small Business Loan Can Help Your Business
Small business loans are a great way to give your small business the boost it needs. Whether you’re just starting out or looking to make the next big move, traditional loans just don’t offer you the peace of mind you can get through small business loans. Small business loans, with their protections and lower risk, allow you to pursue more for your business while not risking as much for yourself as you would with other means.