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 Use PayPal
Did you just sign up for a PayPal account and you are wondering how to use it? In this article we will look at how to use PayPal, why people use it, the features PayPal offers and the pros and cons of this service.
What is PayPal?
It is a payment system offered online and on your mobile device that makes sending and receiving money online easy, safe and secure worldwide. You can fund your account in several ways, including your bank account, credit card and debit card. You can use it to purchase goods and services from retailers from around the world. You can also send money to friends and family around the world too.
PayPal serves as an intermediary. It acts as the middleperson between banks and merchants, transferring funds in a secure and timely manner.
Why Do People Use It?
There are many reasons people use PayPal.
First of all, it is a secure way to send money online. If you use your credit card or debit card to buy goods or services on the web, retailers are sometimes able to access your payment information. This system adds more protection by making sure that retailers are never able to view your sensitive data. It also keeps your personal and financial information secure by using several tried-and-true methods, including two-factor authentication, end-to-end data encryption and email confirmation for transactions.
PayPal is also widely accepted throughout the world. You can use this system to buy goods and services at millions of stores worldwide. For anyone without a credit card or who does not feel comfortable using their credit card to make an online purchase, PayPal can be a great solution. You can send payments without worrying about providing your credit card information to a retailer you are not familiar with.
The Features PayPal Offers
PayPal offers many features that make it unique.
Based on your IP address, it can determine your location once you login to your account. Using cookies and your web browsing history, it is able to help detect if it is really you logging in.
You can easily move money from your PayPal account to your bank account and vice-versa. It typically takes only three to five business days for this to happen. This helps you move money where you want it and when you want it.
Similar to credit cards, it offers users protection when you are buying something online. Let’s say you buy something online, but when you receive it it is different than what you expected, or the item does not arrive at all. In instances like this, PayPal lets you open a dispute. You can open a dispute in its resolution center. This leaves the onus on the seller to prove that you got what you paid for. Otherwise, PayPal will return your money to you.
The Pros and Cons of PayPal
Here are some of the pros and cons of using this system.
- Simple: It is straightforward and easy to use. You can send money to family or friends in a matter of minutes. This is often a lot faster than the banks.
- Family and friends: PayPal allows you to send money to family and friends without incurring any fees. This differs from banks, which like to nickel and dime you on everything.
- Encryption: It encrypts your bank and credit card information, helping keep it safe and secure.
- PayPal fees: PayPal charges you fees to send and receive money for business transactions. This can really add up over time, especially as a small business owner. You could end up paying hundreds or thousands in PayPal fees.
- Account freeze: It’s possible that your account could get frozen. If this happens, it can be a lengthy process to unfreeze.
Step-by-Step Guide on How to Use PayPal
Here are the steps to send money to someone you know using PayPal.
- Visit the PayPal website and login using your email address and password unique to PayPal.
- Once logged in, from the main page choose “pay or send money.” Choose that you are sending money to a family member or friend.
- Enter the email address or phone number of the friend or family member you are sending the money to. For convenience, you will see accounts listed that you often send money to.
- Choose the amount of money that you would like to send, as well as in what currency. You can add a note. For example, you can write that it is for someone’s birthday or to split the rent.
- Choose where the money is coming from. It can be from your bank account, credit card or debit card.
- Click the button to send money now, and that is it. Your money has been sent. It’s that easy!