Tackling Your 2020 Taxes: A Stress-Free Guide
Are you dreading the thought of dealing with your 2020 taxes? You’re not alone! But, with the right approach, you can navigate the process with ease and maximize your refund.
Do You Need to File a Tax Return?
Before we dive in, it’s essential to determine if you need to file a tax return for 2020. If you earned more than $12,400, you’ll likely need to file. However, not everyone falls into this category. The IRS’ Interactive Tax Assistant can help you figure out if you need to file.
Get a Head Start
Don’t procrastinate when it comes to your taxes. Brandon Berquist, CPA, recommends starting early and completing your return in stages. This approach can help reduce stress and give you time to review your return with a fresh perspective.
Stay Organized
Logan Murray, CFP, suggests keeping all your tax-related documents in one place, such as a folder on Google Drive. This will help you stay organized and ensure you don’t miss any important documents.
Understand Who You Owe
When it comes to paying taxes, you may need to file returns with multiple entities. These include:
- Federal taxes: Paid to the U.S. Federal Government, used for national programs like the military and social security.
- State taxes: Paid to your state government, used for state-wide needs like libraries and roads.
- Local taxes: Paid to your local government, depending on where you live.
Let Technology Do the Heavy Lifting
You don’t need to be a math whiz to do your own taxes. Online filing options, like TurboTax or H&R Block, can guide you through the process with automated prompts. If you made $72,000 or less in 2020, you can even use the IRS’ Free File tool to file your federal tax return for free.
Seek Professional Help
Feeling overwhelmed? Working with a tax professional can take the pressure off and provide valuable insights for the future. According to the National Society of Accountants, the average cost of hiring a professional to prep and file a basic tax return is $176.
Count Your Charitable Contributions
Did you donate to a nonprofit organization in 2020? Those donations can help lower your tax bill. Due to the CARES Act, all individuals can deduct up to $300 in charitable contributions made in 2020.
Know Your Stimulus Checks
If you received stimulus checks last year, they won’t be taxed like regular income. However, filing your 2020 tax return can help you collect any money you qualified for but didn’t receive.
Unemployment Income: What You Need to Know
If you received unemployment benefits in 2020, that income is taxable and needs to be reported on your tax return. You should have already received a form (1099-G) with a record of your income and withheld taxes.
Need More Time? File for an Extension
If you need more time to file your 2020 taxes, you can file for an extension. This will give you until October 15 to file your tax return. However, keep in mind that this extends the deadline to file, not pay, your taxes. Any owed amount after May 17 can be charged interest once you file.
By following these expert tips, you’ll be well on your way to tackling your 2020 taxes with confidence and maximizing your refund.
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