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.
Most Profitable Side Hustles
Side hustles have soared in popularity over the last decade, and it’s easy to see why. In a world where expenses like rent, education and childcare continue to increase far faster than inflation, it’s nice to have a little extra cash.
Millennials have embraced the side hustle for non-monetary reasons as well. Many use side hustles to earn a little extra money doing something they love. Sure, they make a little bit, but the real pleasure is in the process.
Let’s take a closer look at the world of side hustles, including the risks and rewards of one, some of the most profitable side hustles, and how you can go about choosing the perfect side hustle for you.
The Risks and Rewards of Side Hustles
On the surface, the reward of a side hustle looks to be basic. You’ll exchange your time for money, which helps with all aspects of your life.
There’s no doubt the cash earned is a major reason why a lot of people embrace a side hustle. After all, who couldn’t use a little bit of extra cash? Especially when you’re first starting your career and likely don’t make a whole lot of money.
But many folks don’t even list monetary reasons as the biggest reason they have a side hustle. Most do it because they legitimately enjoy the work. It’s no coincidence most of the leading side hustles have a creative aspect to them. In fact, many will take less profit in order to maintain their ideal situation.
Meanwhile, there are some risks involved in taking on extra work. Most employers are quite okay with side hustles. Whatever you do on your own time is your own business. But that’s not always the case. If you’re using skills your employer taught you to enrich a competitor, for example, that might be an issue.
Heck, I’ve seen hustlers physically working for the competition during evenings and weekends. You might have an understanding boss who doesn’t care, but it’s best not to tempt fate like that.
There’s also the risk of burnout. Working one full-time job and another part-time job can be great — at first. But as the months and years pass, the grind can wear someone down, especially as the side hustle grows.
Related to this is managing your time. Say you have a big project coming due at work, but you also have side hustle responsibilities. If you clock out right at 5pm to go to your other job, people will notice. It could impact your ability to get a promotion.
Choosing Your Own Side Hustle
When picking your own side hustle, the focus should be on three things.
Firstly, let’s consider your goals. Is the point to earn as much money as possible? Or is it to build a sideline business in something you’re passionate about? Maybe you’re just looking for something to mostly occupy your time on evenings and weekends.
Next, think about your life as it stands today and consider that when choosing the correct side hustle; only considering the most profitable side hustles might not be the best path. If you have a very structured job that always works Monday-to-Friday, then getting a weekend gig might be the ticket. Otherwise, you might need something with more flexibility. If your evenings and weekends are already busy, perhaps you should reconsider the idea all together. You’ll just cause yourself a lot of stress trying to balance it all.
Best Short-Term Side Hustles
Let’s split side hustles into two categories. The first will be for folks who want to earn the most amount of money today. The other will be for someone who’s looking to maximize long-term profitability.
One of the best ways many people can maximize their short-term earnings is to take on extra shifts at work. Yes, I know that’s not really a side hustle, but it’s just so easy I must mention it. For many salaried employees, however, this just isn’t an option.
Another logical path to take is to leverage your existing expertise into similar work. For instance, where I live, the local radio news person makes a solid $500-$1,000 per month doing voice-over work from a room set up in his basement. He has the training and the proper radio voice to make this a painless way to make extra cash. And since he’s not directly working for the competition, his employer doesn’t care.
If you insist on doing something totally new for your side hustle, here are a few ideas. Youth sports almost always need refs, with most paying $20-$25 per hour. Being a brand ambassador can also easily gross $20 per hour, and it’s an excellent gig for extroverts. Anyone with a little specialized knowledge can flip items on eBay of Craigslist. Tutoring college or high school kids can be surprisingly lucrative too, especially if you can tutor several at once.
Best Long-Term Side Hustles
There’s one problem with all the side hustles I mentioned in the previous paragraph. All you’re really doing is exchanging your time for money, and there’s a logical limit to that.
This means if you’re looking to eventually quit your day job, you’ll want to think bigger. You’ll want to build a business that scales.
Some ideas might include establishing a blog or a niche website, a business that can easily outsource things like writing content or maintaining the site. It takes the same amount of effort to create an e-book or online course if you sell it to one person or 1,000. Once you figure out how to make a unique item for your Etsy shop, you can then hire someone else to make it for you while you focus on new items.
This even works on a local scale. Your side hustle of cutting grass or washing windows can easily grow into something where you hire employees. Same thing can apply for cleaning houses or cooking for people. If that’s your goal, then it’s best to plan for the business to take that direction right from the beginning.
Obviously, there are many components to consider about the most profitable side hustles. However, many people use side hustles to make a little extra money, get the creative juices flowing, and to productively occupy their time off. In fact, a lot of business owners you know likely started off doing that on the side and it just grew into something much bigger. Who knows, one day, you may want to build a legitimate business plan for your side hustle.