The tax filing process is often much easier than the stress build-up you may have built in your head. After the process is complete, most people will think “Oh…is that it” after submitting. And there are times you will receive money back as well. So if you thought this was going to be a dramatic process, your surprise is that the most stressful part will be the beginning.
Many people are unaware that they were unknowingly claimed as dependents by their parents while attempting to file for themselves. This happens more than you think; a simple conversation with your parents about your tax situation would save you countless hours of confusion and frustration with the IRS.
If you are transitioning from dependent to independent filing status, it is important that everyone involved has the same understanding. While you can fix any errors your parents made while claiming you as a dependent, it is certainly not a fun process.
It may seem ironic, but tax filing isn’t actually about paying your taxes; instead, it is more of a check on whether you paid the correct amount of tax over the year.
From January 1 to December 31 you receive income, and during that time, Uncle Sam takes a portion (sometimes a lot) of your money.
When you file taxes, you say, “IRS, here is what I’ve earned, now let’s settle up.”
If you have underpaid your taxes, you will owe the IRS.
Filing your taxes isn’t some magic lottery, but simply math coming into line with reality.
Filing Taxes
After you fill in your tax forms and sign them, you can mail them in or submit them electronically and sit back and wait.
- If you electronically file your tax return, the tax software will submit them automatically.
- If you have a tax professional do your taxes for you, the professional will submit the tax return electronically.
- If you are mailing in your tax return, be sure to seal the envelope.
In approximately two to three weeks after you file your tax return, the IRS will deposit your tax refund into your bank account.
If you would like to receive your tax refund sooner, you should consider submitting your banking information when you electronically file your tax return.
If you owe the IRS, you must pay your tax bill by April 15 of the following year (regardless of whether you filed electronically or by mail).
Why Employees Have an Easier Time with Taxes Than Independent Contractors
If you are an employee, your employer withholds income taxes (federal and state) from your paycheck and pays Social Security and Medicare taxes for you.
If you work as an independent contractor (e.g., for DoorDash, Uber, or any gig work—you are the employer and the employee. This means you are responsible for paying federal and state income taxes and Social Security and Medicare taxes yourself.
You need to plan ahead to ensure that you do not have a large tax bill at the end of the year.
Here’s the part that every one puts off until the very last minute.
Here is what you will receive:
- Form W-2 (for employees)
- Form 1099 (for gig work)
- Restricted Provider Tax Forms (from lenders for student loan, mortgage, etc.)
- Form Bank Tax Documents
Companies must send these forms out by 1/31 and typically send them via email or by mail. If you had more than one job, you will receive multiple forms, so it’s a good idea to place everything in one area so you’re not left searching through all the drawers in your house at some later date.
Fill out the Tax Return – In reality, you “can” print the tax forms from the IRS website, fill them in with a pen and mail them.
But (unless solving IRS tax forms is one of your hobbies)—use tax preparation software or hire an expert.
Options are as follows:
- Tax Preparation Software:
- Generally a better value (generally inexpensive; free generally for federal)
- You will complete a series of easily understandable questions that will generate a tax form based on your answers.
- Recommend for persons without self-employment income.
- CPA or other Tax Preparer:
- A bit more expensive but provides less anxiety and stress than figuring out your own returns.
- Recommended for more complicated situations. They may ask follow-up questions, but all in a friendly manner—they’re not going to bite.
Most professionals will generally complete your return in 1-2 weeks. Many will send you an Engagement Letter, a form that details the roles and responsibilities of both the client and the professional—and you do not need to sign your life away.
The April rush
April will be busy and stressful for taxpayers. If you file early, you have more chances to be processed sooner than later, as well as having less chance of error, and you will have more time to address any tax-related issues that may arise. If you file early, your refund is received sooner. If you owe taxes, you will know sooner rather than later how much money you will need to pay the IRS. By waiting to file, you do nothing to benefit yourself, and the IRS will definitely not forget about your tax filing obligations.
If this is your first season of filing your taxes, take a deep breath. It may seem complicated, but if you break it down into smaller parts, such as gathering your tax documents, selecting a method of filing, submitting your tax return and paying or receiving your tax refund, it is not as complex as it may seem. Once you have a better understanding of your tax filing obligations, you will find tax filing will become much simpler, whether you choose to file your taxes yourself using financial software or you choose to hire a tax professional to assist you.
