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.
How to Get Cheap Car Insurance
Car insurance provides a car owner with protection from the financial results of an accident, theft, vandalism, medical costs, and liability. You may be required to purchase a minimum amount of auto insurance, depending on where you live and whether you have a loan or lien on your car. If you are a new driver or are not familiar with insurance, do not worry. In this article, we explain how to get cheap car insurance.
Laws vary from one state to the next. In states where car insurance is not mandatory, drivers living there must show proof that they can take financial responsibility for any accidents or damage.
If you have a car loan or lease a car, the lienholder may require certain types and amounts of coverage. You may have to show proof that you have full coverage insurance that includes liability, comprehensive, and collision coverage.
Types of Car Insurance
This is the least expensive car insurance option and may work well if you do not have a loan or lease, your car is not worth much, or you just need to satisfy your state's laws. Keep in mind that if you are at fault in an accident that damages your vehicle, your liability insurance will not pay to fix your car.
Before you decide to get liability-only insurance, find out how much it would cost to add comprehensive and collision coverage to your vehicle's policy. If your driving record is good, it may be worth spending a bit of extra money to get a policy offering more coverage.
Full-Coverage Car Insurance
This includes collision coverage for your vehicle and property if you cause an accident that damages your car. It also includes comprehensive coverage, which pays to fix your car if it is vandalized, you hit an animal in the road, or your car is damaged in a storm. With collision and comprehensive coverage, you will pay your deductible before your insurance kicks in.
Your agent may also recommend that you add medical payments or personal injury protection, uninsured motorist coverage, and glass coverage to your policy. Each of these insurance types is optional. Be sure to get a cost breakdown before agreeing to additional insurance coverage.
Tips for Getting Car Insurance
If you need car insurance, there are a few things you should understand about the process of purchasing a policy.
You can get a quote online, but it does not represent your final price unless you work with a company that provides a 100% online experience. Car insurance is an important part of many peoples' financial lives, so ask yourself if you would be comfortable going through the entire claims process online or if you would want to talk to an insurance agent if you are involved in an accident. Many people prefer to have a conversation with someone who understands the local rules about insurance and can help choose a budget-friendly policy that includes a good amount of coverage.
If you have never had car insurance and need a policy, you will start by contacting an insurance company or insurance agent in your area. You can work with an independent insurance agent who can get you several quotes from different companies, or you can choose an agent that works for just one company. If you are not sure which insurance company to choose, an independent agent can help you research rates.
Car Insurance Costs
Many factors contribute to the amount of money you will pay for car insurance. When getting quotes, it can be tempting to choose the cheapest policy. However, it is crucial to get insurance from a company that has a reputation for paying claims. Some insurance companies with familiar names habitually refuse to pay or underpay claims, leaving their clients scrambling to pay their medical bills and fix their vehicles.
Get more than one quote and make sure that each quote includes the same amount and types of coverage, along with identical deductibles.
If the insurance coverage you need is too expensive, ask about raising your deductible to reduce premiums. Of course, you will have to have an amount equal to the deductible set aside in an emergency fund, so you can get your car fixed if you are at fault in an accident or if you accidentally damage someone else's property while driving.
How to Find the Right Cheap Car Insurance Policy
Before you sign up for insurance, ask how the company handles claims. Make sure you understand under what circumstances you may need to pay your deductible.
Your agent can help you understand how an insurance company comes up with their rates, how you could reduce your car insurance costs, and what type of policy you must purchase to stay in compliance with your state's laws and keep your lienholder happy.