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 Prevent Credit Card Fraud
There are few worse feelings than knowing someone has stolen from you. It doesn’t matter if they broke into your garage, house, or car, or if they used technology to do it. It still feels terrible.
The good news is the more physical forms of theft are decreasing, and the trend seems to be going in a positive direction. The bad news is it appears that these folks are just using new tactics and reallocating their resources, as other forms of theft — like credit card fraud and identify theft — are up. This strategy makes sense for the bad guys; after all, nobody wants to be confronted by an angry homeowner while rifling through a jewelry box.
This article will take a closer look at one of the most common types of theft present in America today, credit card fraud. We’ll cover what exactly credit card fraud is, how it happens, how to prevent credit card fraud and what you need to do if you’ve been a victim.
What Is Credit Card Fraud?
Credit card fraud is when somebody uses your credit card without your express permission. It’s not quite as direct as taking cash from your wallet, but it’s still a serious crime.
It can take on many forms, ranging from a simple scam to elaborate schemes that involve identify theft, card scanners and other sophisticated ways to make an illegal profit.
How Does It Happen?
There are dozens of different strategies criminals can use to get access to your credit card. Some of these methods are quite clever, so you need to be aware of common schemes and suspicious activity.
Let’s start with some of the simple methods. Somebody takes your card and goes on a shopping spree. It takes a few hours for you to notice, so our thief has made out with a few hundred dollars in ill-gotten goods. Some will want to avoid shopping at local stores — they have cameras, after all — so they’ll go online and shop there.
Another common scam is that someone will get access to your card, copy down all your information and then go and buy stuff online at their leisure at some point in the future. This delay makes it more likely that they’ll get away with the crime. You’ll have no reason to suspect them.
What people really worry about are the scams that use technology. Card skimmers — which a fraudster can easily connect to an ATM or some out-of-the-way self-pay option (like at a gas station) — steal your credit card’s information and transmit it electronically to some computer a long way away.
Thieves can also get your credit card information by hacking into the back end of a website where you’ve purchased something. The goal of such a raid is to get in and out without the website’s owners ever finding out, which happens more often than you’d think.
Sometimes scammers even have access to technology that can steal your card’s information while it’s sitting in your wallet.
How Can You Prevent Credit Card Fraud?
The first lines of defense are the credit card companies themselves. They spend billions of dollars each year on various technologies that are designed to identify fraud. This means your issuer has a pretty good chance of detecting fraud right as it’s happening.
Just about everybody with a credit card has gotten a call from their card issuer, asking if a recent transaction was really them, or if it was someone else. Banking apps have made this even easier; the call has been replaced by a simple notification to your phone.
However, you shouldn’t solely rely on your credit card company to identify potential fraud and deal with scammers. Many of these thieves know exactly how credit card companies think, and their frauds are specifically designed to look natural. If unchecked, a fraudster can use your card for months and not create any suspicion.
The most effective way you can guard against credit card fraud is by checking your statement each month. Take a few minutes and go through your purchases, making sure you’ve made each one. If any look suspicious, it’s time to call the card company.
Next, be smart when using your card. Be mindful of where you take cash out of ATMs. Maybe avoid the gas station self-pay in favor of going inside and talking to an actual person. Stick to large, trusted and secure websites when shopping online.
And finally, don’t give your credit card to anyone else to use. I’m constantly amazed at how often I’ll see people give their card to someone they hardly know to make a quick trip to the store or to take care of an online purchase for them.
Also, be extremely vigilant and cautious when giving out your credit card information. Many scammers pretend to be legitimate business, banks or even government agencies, and they can use a variety of tactics to get you to verify your card information. Never give out your credit card information over the phone, by text, or through email; most legitimate businesses and government agencies do not collect information this way. If you are not sure, contact the business or agency through official channels you know are secure to verify.
What to Do if Your Card Has Been Compromised
If you even suspect your credit card has been stolen, the first step is to call your card issuer and sort out the problem with a representative of the company.
If the theft is someone physically taking your card, the card issuer will immediately cancel that card and issue you a new one. You’ll be without a card for a few days, but that’s a small price to pay. Even if you’ve just lost your card and nobody has made any fraudulent charges on it, the best thing you can do is call and get the old card cancelled.
If nobody has physical possession of your card, all fraudulent charges applied to your account will be dropped. If somebody steals your actual card and you don’t let the credit card company know right away, you may have to end up paying for those charges. The onus is on you to let the card company know, not the other way around.
The next step should be to check your credit report and make sure nobody has stolen your identity. Quite often, someone with credit card information only intends to make purchases or transfer payments to a fraudulent business or account. But sometimes, it’s all part of a much larger scheme to steal your identity. It’s best to check your credit report for anomalies, just in case.
If you even suspect identity theft, a smart move to make is to freeze your credit. You’ll have to manually unfreeze it whenever applying for new credit, but that doesn’t happen very often. And it’s an effective way to catch somebody who’s trying to get credit out in your name.
The Bottom Line
Usually, credit card scammers are small-time criminals who rip off a whole bunch of people in small amounts. This kind of scam can be easily caught by the card issuer or by a careful review of your monthly statement. This is nothing more than a minor inconvenience, and there are many simple strategies you can use to identify and prevent credit card fraud.
But sometimes, it can be a much more serious situation. This means you’ll likely want to take precautions if your card info has been compromised. After all, it’s better to be safe than sorry.