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.
Why Mobile Payment Apps?
Hey, using a plastic credit card is so 1999, right?
Mobile payment apps have taken off in the few years since they’ve been introduced, with nearly 30% of Americans reporting they would like to pay for every transaction with their smartphones. They’re even more popular with young folks, with 86% of students on college campuses reporting they regularly use payment apps.
It’s easy to see why they’re so popular. We’re collectively addicted to our smartphones, so using them to pay is easy. Keeping track of purchases using these apps is a breeze, too. Your phone is much more secure than cash, and you are not earning any credit card rewards by using cash or debit cards.
Plus, there is a big reason we have not talked about yet. It’s pretty cool to tap your phone onto your local grocer’s PIN pad and see the transaction go through. How do they even do that, anyway? That’s some "Star Trek" stuff right there.
Let’s take a closer look at some of the most popular mobile payment apps you can start using today.
Apple Pay is one of the more flexible payment apps on the market today. You can use it to purchase items at the store, online or through apps. You can also use it to send money to others through a simple iMessage.
Paying in store is a simple process that uses either facial ID or a fingerprint to ensure security. It’s faster than using a credit card, too. And Apple users can also use their Apple Watch to pay. You can also link your account to your Apple credit card, which comes with 3% cash back.
Fees are reasonable too, with there being just a 3% charge to send money to friends and family if it comes from your credit card. Other than that, the service is completely free for users.
One big downfall of Apple Pay is it is limited to iPhone users only. So, if you are using an Android phone, you are out of luck. You’ll be forced to use another service.
Google Pay offers many of the same features that Apple Pay does. You can use it to pay in stores that are equipped for it. It’ll easily allow you to purchase items online or through apps on your phone. And you can easily use it to send money to others.
Google Pay also comes equipped with the latest security features, so you can rest easy if you ever lose your phone.
Not surprisingly, Google Pay is geared more towards Android users. The big advantage of Google Pay versus Apple Pay is you can use it on any phone. Google Pay has an iOS app, but Apple Pay is limited to Apple devices.
One disadvantage Google Pay has compared to Apple Pay is that you cannot use a credit card to send money to someone else. You’ll have to link your account to your bank to use that feature.
Gone are the days when PayPal was the weird way to pay for stuff you bought on eBay. It has become one of the world’s largest payment processors.
PayPal is a terrific app for sending and receiving money among friends. If you send cash from your PayPal balance to someone else in the U.S., you will not pay any fees. Transaction fees apply if you are sending money from your debit card or credit card, or if the payment is leaving the country.
The company’s fees for sending money overseas are very reasonable, which has made PayPal one of the go-to apps for that purpose. It’s especially convenient for businesses who have many employees in different nations around the world.
There are a few major disadvantages to the PayPal app, however. You cannot use it to purchase anything in store. Also, comparatively few online retailers allow you to pay with your PayPal balance. This means that you are likely stuck using your credit card through this app anyway, at least when buying stuff.
It would be nice for PayPal to make it easier to spend money in your PayPal account, without having to transfer it to a bank.
Venmo is a little like PayPal because it focuses on sending cash primarily to other people, rather than using it to pay for items.
Here’s how it works. You have a Venmo account — which is then linked to your bank account and credit card. You use it to send and receive money to and from your friends, which Venmo makes incredibly easy. Money in your Venmo account can then be transferred to your bank account, albeit for a small ($0.25 per transaction) fee.
You can use Venmo as a payment method for many top websites and apps, but keep in mind you’ll be limited to the same number of merchants that accept PayPal.
Venmo and PayPal are so similar because Venmo’s parent company was purchased by PayPal a few years ago. I’d just stick with the PayPal app if you already have that.
Your Bank's Mobile Payment App
If you use one of the major banks — like Chase, Bank of America or Wells Fargo — chances are you can pay for many things through your bank’s app; even purchases at traditional retailers.
For instance, the Chase app allows you to easily use your banking info to pay for mobile orders on websites or apps. You can use it to pay in physical stores too, assuming the store is equipped for it. Other major bank apps have similar functionality.
You will be somewhat limited in merchants that accept your bank’s app payment method. There are hundreds of major retailers who have invested in the equipment needed to take mobile payments, but you will not have as much luck if you go to local mom and pop retailers.
Mobile Payment Apps: The Bottom Line
It’s easy to see why mobile payment apps are so popular; they are just so convenient.
If you’re still on the fence about which one to use, I would not make it too complicated. I’d stick with either Apple Pay or Google Pay, depending on what device you prefer. Each comes with good security, ease of use and are widely accepted.