You don’t always have to run and hide as tax season approaches. In fact, there are plenty of things you can do when filing your IRS tax return to avoid miscalculations that lead to tax debt. There are tips you can follow regardless of how you earn money, like whether you work for an employer, work for yourself, own a small business, or receive passive income or government assistance.
If you work for an employer, you’ll want to verify that your W-4 is set up properly. This is a form that tells the employer how much money to withhold in taxes from your paycheck. The document uses the following information to calculate your tax withholdings:
- Tax filing status, i.e. head of household, married filing jointly or separately, single
- Number of children/dependents
- Additional withholdings
It may be a good idea to analyze and change your W-4 when you’ve had a change in your life, such as if you get married or welcome children into your family. Changes to your family makeup can affect your tax liability, and you can submit a new W-4 anytime throughout the year.
If you are self-employed, you are required to estimate your own tax withholdings throughout the year. There are multiple resources from the IRS that help you calculate your potential taxable income based on estimated earnings for each quarter or the year.
Then, you must pay quarterly taxes based on these estimates so that you do not have to pay a large sum when you file. Earning periods and quarterly payment dates are as follows:
- January 1 – March 31, pay by April 15
- April 1 – May 31, pay by June 15
- June 1 – August 31, pay by September 15
- September 1 – December 1, pay by January 15 of the following year
You may find that you still owe money for the year, especially if you made more than you thought you would. On the flip side, you may be owed a refund if you earned less than your estimate. Just remember that in addition to paying federal income tax, self-employed individuals must also pay Federal Insurance Contributions Act (FICA) taxes.
It may be helpful to start gathering documents and asking relevant parties for important tax documentation at the start of the year. Here are some of the most common documents used to file your federal income tax return:
- W-2 earning statement from your employer
- 1099-MISC earning statement from clients you earned income from as a freelancer/contractor
- 1099-G earning statement for government assistance, like unemployment
- 1099-R earning statement for retirees
- 1098-T tuition payment and student loan interest statement
- 1099-DIV or 1099-INT earnings statement for dividends and other investments
- 1098 mortgage interest statement
Online tax filing is one of the most efficient and accurate ways to file your federal income tax return. You can e-file your taxes with easy-to-use calculators that do all the math and fill out the IRS forms for you. Many of these tax filing services even let you file your taxes online for free. It’s recommended that you compare tax preparation services to find one that works for you.