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.
Different Financial Situations Call for Different Loans
Throughout the nation and world, everyone has a different financial position and set of circumstances. Due to that, we all have different problems that might result in taking out a loan; unfortunately, this might be difficult for someone with bad credit or no credit.
Before pursuing any type of financial assistance, it is imperative to know the options out there for you and consider the pros and cons that each option provides. Below, I will introduce a variety of potential alternatives for individuals without a credit check – be sure to analyze each alternative and select the option that best suits you.
Consider the Risks of Each Option
Below, I will cover a handful of loan options that will not require a credit check. The below content will be divided by low risk, medium risk and high risk – please note that everyone has different circumstances and will consequently need to pursue different options.
While you can pursue a personal, no-credit-check loan, it is important to understand that there are alternative options. Unfortunately, most personal loans come with extremely high APR and other disadvantages – Below, we will cover a range of alternative options that should be considered.
A good rule of thumb, though, is to try and land the lowest risk option for your given situation!
- Some creditors offer a lack of credit checks when applying with a co-signer with excellent credit.
- Favorable interest rates on the loan.
- Does not require any collateral.
- Requires someone to sign with you.
- Failure to pay the loan will hurt your and your co-signer's credit.
Unfortunately, no-credit-check loans will always have some dynamic risk that those with fair or good credit will not face. With that said, a co-signer loan is the best option for those who can go this route.
In my life, for example, I was fortunate enough to have supportive parents who were willing to co-sign on my first vehicle as I didn’t have the credit score and history to receive the necessary financing. If you can pursue this option, you should. Remember though, the co-signer is betting on you and risking their credit on your behalf – don’t make them regret it.
Medium Risk Options
No-Credit-Check Installment Loan
- Lower APR than a payday loan and other alternatives.
- Relatively large borrowing sum.
- Paid back via fixed monthly payments.
- Still have relatively high APR
Secured Credit Cards
- No credit checks from some issuers.
- If you can’t get approved for an unsecured credit card, typically easier to get approved for a secured one.
- Requires collateral, similar to a secured loan.
- Must have enough cash upfront to put down equivalent to the card credit line. (Failure to make payments results in forfeiture of the deposit.)
The two options above, no-credit-check installment loans and secured credit cards are considered medium-risk options due to their lower APR and their payment cycles. Unfortunately, a secured credit card will require enough liquidity from the applicant to cover the line of credit requested – this will make it difficult to be an emergency funding source. An installment loan, on the other hand, gives the applicant a larger borrowing sum that they pay back via fixed monthly payments; unfortunately, the risk here is that the APR rates are still relatively high.
- Lower interest rates than other options.
- Easier to get approved with little or no credit (oftentimes, it does not require a credit check).
- Requires collateral to back the loan.
- Defaulting on the loan will lose you the asset collateralized. (Could lose house, boat, car, etc.)
- No credit check required.
- Short-term (2-4 weeks) loan to be repaid on next paycheck.
- Extremely high APR (upwards of 400%).
- Should only be viewed as an emergency.
The above options are high-risk and should be viewed as an absolute last resort. Secured loans require the applicant to put up collateral; this is often in the form of your house, car or boat. Unfortunately, defaulting on the loan could cause more damage than you’d expect – you will ultimately lose your collateral. On the contrary, a payday loan does not require collateral but it does have an APR upwards of 400%. A payday loan should be viewed as a last resort option for short-term liquidity.
No-Credit-Check Loans and Alternatives Can Vary
It is important to realize that these loans and alternative options will vary based on creditor and applicant. While the information presented above is a great general overview, you should consider your situation and circumstances before making a decision. Consider how important the funding is at this moment – it might be in your best interest to hold off and attempt to build your credit in the meantime.