This partner post is part of the TaxAct #DIYtaxes blog tour which empowers you to take ownership of your finances by doing your own taxes. TaxAct provides the tools and guidance to help you confidently file your taxes easy and fast. Do your own taxes today at TaxAct.com. You got this.
Do you do your own taxes? If not, maybe you should start. Filing taxes on your own can make you smarter. You’ll learn new skills and gain a better understanding about your personal financial situation than you ever thought possible. Trust me! I’ve definitely learned a lot about both tax rules and regulations, as well as my own money management style by doing my own taxes in the past.
When I first started doing my taxes, I was using the easy phone system. Because I was eligible for the 1040-EZ filing, all I had to do was call, report my income, confirm, and my refund was in the mail shortly after. As technology improved, I continued to file the 1040-EZ but I started to do so online. Then, I started a business and my taxes got a little more complicated. But I simply used an online filing service that walked me through the questions that I needed to make filing easy. And I learned a lot about credits, deductions, and where to go on IRS.gov to get more information.
Here are some ways that filing your own taxes can make you smarter.
Filing taxes on your own allows you to…
1) Learn About Tax Filing Deductions
As mentioned, one of the benefits of doing your own taxes is learning more about tax rules, regulations, and best of all, deductions. When you walk through doing your own taxes, you may find places to save money that you have never used before. This is especially true if you use a tax software that takes you through several question and answer prompts about events that may have taken place in the last tax year. Once you learn about these deductions and savings tools, you’ll be able to use them for years to come, as long as the tax code doesn’t change in the meantime.
2) Become Aware of Income and Expenses
It’s easy to get caught up on how much money you are bringing home every two weeks when you get paid and forget about the bigger picture of how much you are really earning each year in terms of both salary before taxes and other withholdings for retirement, health insurance, etc. But when you complete your own tax return, you’ll get a chance to see what your earnings and expenses really are.
3) Complete a Financial Check-Up
Again, doing your own taxes means you have to gather up all of your documents for the year, including earnings statements, expenses, etc. It’s also a good time to review the other aspects of your personal finances, like your debt obligations, investment accounts, insurance, and more. While you have all of that out and in front of you anyway, it’s a good idea to also give your budget a once-over to make sure you are saving as much money as you can. You may find that you can put more money toward your savings goals, or that you could lower some of your monthly bills with a little negotiation or leg work.
4) Make Last Minute Adjustments
By doing my own taxes, I’ve also been able to make some last minute adjustments to help my overall financial picture. As an example, you have until April 15th to make retirement contributions for the prior calendar year, which may help you cut down on the amount of income tax you owe to the government. Doing your own taxes means you have the ability to look at your tax status and decide if adding more money to your retirement savings is a good idea to help lower your taxable income.
5) Review and Adjust Withholdings
When you get ready to sign the bottom line, don’t think you are finished just yet. Once you’ve determine how much you owe to the IRS, or how much of a refund you’ll be getting back, you should take the time to adjust your withholding rate too. Although getting a large tax refund may seem like a good idea, it’s actually better to receive more money on every paycheck throughout the year instead. If you consistently receive a large tax refund, it may be time to lower you withholdings so you can receive more of your money throughout the year instead of getting a lump sum during tax time.
Likewise, if you ended up owing a lot of money into the IRS you can adjust your withholdings the other direction to have more withheld from your paychecks to get your estimate as close to $0 as possible for the new year.
Doing your own taxes doesn’t have to be daunting. In fact, it’s easier than ever thanks to many online tax programs that allow you answer simple questions and quickly fill out a few fill-in-the-blank forms. Plus doing your own taxes is a great way to learn new skills and be aware of your own personal financial situation.
Are you doing your own taxes?
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