30-Day Challenge #3: Prepare your Tax Return Accurately and File Early (March, 2017)

30-day challenges

We are pleased to continue our 30-day challenge series. Past challenges can be found here.

This month's 30-day challenge is to Prepare your Tax Return Accurately, and File Early.

You've successfully completed this challenge once you've filed your US federal income tax return by March 31st.

Recommended Steps:

Plan

1. Learn how US income taxes work:
2. Watch Basics of US income tax rate schedule
3. Watch Tax deductions introduction
4. Read /r/personalfinances's very own wiki page on income tax
5. Understand what exactly your tax return is: A form you fill out, telling the government how much money you made, calculating how much taxes you owe on that money (your "tax liability"), and "squaring-up" with the government: Figuring out if you already paid more than your actual tax liability throughout the year with paycheck withholdings (in which case you will get a tax refund), or if you haven't paid enough throughout the year, and owe a balance to the government.
6. Determine your filing status and determine whether you can be claimed as a dependent by anyone (for example, your parents), or can claim any dependents. (IRS Dependent Tool)
7. Prepare a "map" for what documentation you will need to fill out your tax return, then go through the list and make sure you have the documentation for each. Don't worry if you forget something. The software you use to fill out your tax return (or the tax return form itself) will remind you of things you might have forgotten.
8. Jot down every possible way you made money this year (remember, even if you don't get a form, you still need to report it):
   • paycheck from my job (W-2 form)
   • interest on my bank account (personal records like your December account statement, or a 1099 form)
   • dividends from my stock (1099-Div)
   • income from my small business or self employment (personal records, or 1099 form)
9. Make a list of all the possible deductions you might think you are eligible for, and make sure you have documentation:
   • mortgage interest you paid (1098)
   • student loan interest you paid (1098-E)
   • education expenses (1098-T)
   • state or local income taxes (W-2)
   • charitable contributions (personal records)

Prepare and file your Tax Return

Using one of the following methods

1. See if you are eligible for completely free tax return preparation software sponsored by the IRS
2. Use paid (or free) tax return preparation software. Examples: TaxAct, TurboTax, CreditKarma, AARP, FreeTaxUSA, TaxSlayer. See our megathread for discussion.
3. "Manually" fill out the tax return form online using IRS Free Fillable Forms

By starting early, it allows you more time to deal with unanticipated questions about your tax return. "Wait, can I claim my girlfriend as a dependent"? "Do I have to report income from renting out the spare room in my house to a friend?". When these come up, feel free to create a new post asking for help with as much details as you can provide.

Submitted March 01, 2017 at 10:06AM by AutoModerator http://ift.tt/2mF4Ao7