7 Hacks You Need to Survive Tax Season

7 Hacks You Need to Survive Tax Season

Image Description
General
Image Description
Created By Admin Last Updated Sat, 12-Sep-2020

Here are seven hacks that can make tax season a little simpler, ranging from “I should have known that!”-level to stuff that’s not as well known.

Don’t overpay for tax prep services

You’ll see a wide range of prices for tax preparation services, whether you want to sit down with a professional or use a guided online program.

But you might not realize that you’re probably eligible for some free tax-prep services, whether for federal taxes, state taxes or both.

Eligibility requirements vary, but in general, if you’re in your 50s or below and have an adjusted gross income of $70,000 or less, you’re probably eligible for at least one of the free options.

Keep track of your charitable donations

Since the Tax Cuts and Jobs Act dramatically increased the standard deduction, you might not think it’s worth trying to deduct your donations to nonprofits. But it’s still worth keeping track of those receipts and thank-you letters.

That’s because the rules can sometimes change in your favor. For example, when you file your 2020 tax return, you’ll now be able to deduct up to $300 of charitable contributions, even if you take the standard deduction.

That may not help you today, but it could improve your tax situation next year. Dig out those wrinkled donation receipts you didn’t think you’d ever need and file them away for safekeeping!

Remember that unemployment income gets taxed

If you or your spouse received unemployment benefits, keep in mind that those payments are taxed as income.

It’s not something you can prevent dealing with if you already got those untaxed unemployment benefits. But being aware of any taxes you may owe the next time you file can help you prepare for the potential costs involved.

Deduct your student loan interest

If you have student loans, I’m going to go ahead and assume you hate paying that bill each month. But there’s a tax deduction you can take during every year you’re paying down that debt.

You don’t need to itemize your deductions in order to take the deduction for student loan interest paid in the previous tax year. Doing so could reduce your taxable income by as much as $2,500.

Report your side income

“All income, no matter the amount, earned through a business, as an independent contractor or from informal side jobs, is self-employment income which is fully taxable and must be reported,” Flores said, “If you earned at least $400 income through a business, as an independent contractor or from informal side jobs as a self-employed individual, you must also pay self-employment tax.”

Sure, if you made a few bucks mowing lawns for your neighbors, you can probably get away without reporting that income. But you’ll want to make sure you report anything that has a paper trail (digital or otherwise) to avoid the chance of an audit.

Don’t be afraid to pay in installments if you owe

Just like a loan or credit card, you pay interest for the privilege of spreading out your payments. And you’ll pay a setup fee to get started. But paying in installments is way cheaper than the penalties for not paying at all—and your tax payment plan isn’t reported to the credit bureaus.

If you get overwhelmed, request an extension

If you still can’t find the forms you need or you’re putting out fires elsewhere in your life, Tax Day can creep up on you. But it’s easier than you might think to request an extension.