“In this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin
We know that filing your yearly tax return is one thing most Americans dread each year as April deadlines approach. But we also know that “Uncle Sam” isn’t the kind of man you want to cheat out of money he may believe he’s due. Taxes are an inevitable cost that each citizen must pay in order to fund our government and all the programs they run and provide (yes, even the ones we’d rather not have our money go toward).
I’ve been filing taxes since I was 16 years old, like most of my fellow Americans. But citizens today have much easier filing options than the tax books and paper return forms of back then. There are so many other ways to file quickly and simply these days, that filing doesn’t have to seem so hard anymore! With a little preparation and a push in the right direction, correctly filing your tax return this year is just a hop, skip, and a jump away.
The Complete Guide to Filing Taxes and Getting a Huge Refund
Before filing your tax return this year, (or any year in the future) do a little ground work first. Gather up all documents, receipts, numbers, and paperwork you’ll need on hand when you sit down to file.
Not sure what you need? Here’s a list to get you started:
- Copy of last year’s tax return
- W-2 and 1099 forms
- Mortgage interest, mortgage insurance, and property tax info
- Student loan info
- School tuition and fees
- Charitable gifts and donations
- Medical bills costing over 10% of your income
- Contributions to IRAs
- Receipts from business expenses
- Volunteer work expenses
- Business-related travel costs
- Childcare receipts and expenses
Tax Credits vs. Deductions
Before I read up on taxes on my own, I actually used to think credits and deductions on your yearly taxes were the same thing. (Maybe you thought the same?) But they aren’t.
Both reduce the amount in taxes you may owe, but in different ways. Deductions lower your taxable income and are calculated using the percentage of your tax bracket. Credits, on the other hand, reduce the amount of taxes you owe by an actual dollar amount (source).
If your family has little ones to care for, there is a permanent credit – the Child Tax Credit – that allows for $1,000 per child dependent under 17 years old.
Adopted a child?
If you adopted a child this past year you may qualify for a hefty Adoption Credit up to $13,460 per child of adoption expenses. (See the deductions section for additional help.)
Paying for child care?
The Child and Dependent Care Credit allows up to $3,000 for one child’s childcare costs, and up to $6,000 for 2+ children’s childcare costs. Your kids must be under 13 years old and in need of childcare because both parents work or attend school.
Going to school?
The American Opportunity Credit offers up to $2,500 per student for the first 4 years of a college degree or certificate program. You may even be eligible for up to $1,000 of it as a refund.
There’s also something called the Lifetime Learning Credit that may provide up to $2,000 a year, or 20% of the first $10,000 you spend for continued education (after high school). You may qualify based on your income level.
If you’ve purchased health insurance through the Health Insurance Marketplace and your household income falls within a certain bracket, you may qualify for the Premium tax credit to make up the cost. The lower your income, the greater the credit. When you originally purchase through the Health Insurance Marketplace, it’ll ask you whether you want your estimated credit to be paid to the insurance company so that your bill is cheaper, or you want to wait and collect after tax time. Read all about it on the IRS website – the Premium Tax Credit.
Social Security contributions?
Social Security credit – paying FICA (Federal Insurance Contributions Act) for Social Security is mandatory, and no, you can’t get that money back. That is unless you paid too much. If you worked more than one job and your overall income adds up to more than the FICA threshold, you may be entitled to a credit for “overwithholding”. In 2016, earnings up to $118,000 were taxable for FICA and in 2017, up to $127,200 will be.
Tuition & Fees –
If you, your spouse, or your dependent(s) are enrolled in college, you may be able to deduct cost of tuition and school fees. These deductions usually apply if you don’t qualify for school tax credits (like the AOC above).
Elementary & Secondary School Educators –
If you’re a teacher at a primary or secondary school, you may be able to deduct up to $250 in related business expenses for things like books, supplies, equipment, and other teaching materials.
Adoption Benefits or Assistance –
In the credits section I mentioned the Adoption credit. But you can also add to that by deducting up to the same amount from your income if your employer offers adoption benefits. Both a credit and a deduction can be claimed for the same adoption, but not the same expense. Read more on the IRS website about Adoption credits and deductions.
Home Owner Deductions –
There are quite a few options for deductions when you own a home. You can deduct the cost of mortgage insurance premiums (not to be confused with Homeowners Insurance) as well as mortgage interest on your primary (and secondary, if applicable) residence you own, the interest on up to $100,000 worth of equity loans, and any home improvements that were required for medical care.
Business Travel Expenses –
While you can’t deduct the cost of going to and from work, you absolutely can deduct costs of traveling to visit clients as well as out-of-office business meetings. If you’re self-employed (a sole proprietor), these would go under your Schedule C or C-EZ form on your individual taxes. If you’re employed by a company, they’d be claimed as “unreimbursed business expenses” and would have to exceed 2% of your adjusted gross income in order to be deducted.
Service Animal –
You can’t claim expenses for a normal pet, but you can deduct for a service animal. The cost of buying, training, and maintaining one can be considered an itemized medical expense.
Dry Cleaning Uniforms –
You can’t deduct the cost of clothing you buy for work, but you can deduct the cost of drying cleaning or laundering uniforms (work, volunteer, or troop uniforms you can’t wear anywhere else).
Volunteer Work Expenses –
While you aren’t getting paid for your charity work, you can get a deduction for it on your yearly tax return. Not for hours worked, mind you, but you can claim any unreimbursed out-of-pocket expenses (Did you bake cupcakes for a charity’s bake sale?), including $0.14 per mile traveled in connection with actual volunteer work.
Charitable Donations –
Donations to qualifying* organizations can allow you deductions on your taxes.
Ones that qualify* are:
- A Federal, state, or local government – to be used for public purposes
- A church, synagogue, or other religious organization
- A non-profit organization created for a charitable, educational, religious, literary, or scientific purpose
- A war veterans’ organization
- A volunteer fire company
- A civil defense organization
Ones that don’t qualify are:
- Social and sports clubs
- Labor unions
- Chambers of commerce
- Any for-profit organizations
- Any lottery or raffle
- Giving to individuals
- Politicians and political organizations
Store-Bought Medical Tests and Supplies –
We’re not talking over the counter medications here, did you know you can claim diagnostic tests such as pregnancy tests on your taxes? Yep! Even diabetic blood sugar tests. And for moms, you can also claim breast-feeding supplies like pumps and bottles.
Medical Costs –
You can deduct qualified* medical expenses from your taxable income if they exceed 10% of your adjusted gross income. These expenses include preventative care, treatment, surgeries, dental and vision care, visits to psychologists or psychiatrists, prescriptions, glasses, contacts, hearing aids, and the like (as long as you weren’t already reimbursed by your healthcare or employer). **You can also deduct the cost of cosmetic surgery if it was medically necessary.
Pro tip: keep track of costs and expenditures in a journal of all the small charitable donations you make toward charity car washes, bake sales, resale shops, etc., as well as business travel expenses, and anything else listed above. That way you have it on hand for tax time.
***For small business owners, check out this list of a Dozen Deductions for Your Small Business. Bankrate lists and details business deductions available to you, from home offices and furniture to mileage and the cost of hiring your kids. You should also check out the Entrepreneur article 75 Items You May Be Able to Deduct from Your Taxes. It’s a long list, but it could be helpful. ***
Use a Reputable Tax Filing Program (e-Filing) or Person
Once you have all your documents together, you’ll have to decide how exactly you want to file. Lucky for you, there are several options depending on just how complicated your taxes may potentially be.
TurboTax (or TaxAct, which I am less familiar with) –
I love me some TurboTax! It’s the program I used to file my tax returns before starting a business. TurboTax and TaxAct are free (although they offer purchasable upgrades), easy to use, online e-file programs that you can use yourself. They walk you through the tax filing process step by step, asking you questions you may not have thought of on your own. They’ll update you on tax laws, credits, and deductions, to try to make sure you get as much money back as possible.
Certified Public Accountant (CPA) –
If you’re super busy and don’t have the time (or desire) to learn how to file taxes on your own, look into hiring a tax accountant. It’s a costly expense (sometime costing up to $800+) but can be worth it especially if you own a LLC or incorporated business. Things can get pretty complicated when you have to worry about more than just your personal income taxes, and CPAs are trained to make sure you only take legitimate deductions and applicable credits.
H&R Block is another helpful option if you’d rather have a person to work with face to face. They have a free filing option if your taxes are simple and only require a 1040, 1040EZ, or 1040A. James has used H&R Block many years in the past. However, they aren’t personal accountants, so they won’t keep on top of things to make sure your taxes are filed. It’s up to you to make sure everything is done and processed correctly.
Do Your Tax Return ASAP
Ideally, you’ll want to file your tax return as soon as you get those W-2s in the mail. We try to file ours as soon as possible after receiving ours. The faster you get it done, the sooner you can get your refund! (If you’re getting any money back, that is.)
Do it all at once – set a block of time and get it done. All of it. Otherwise you run the risk of forgetting to add something in, or possibly forgetting to file at all. (It sounds ridiculous but it happens.)
Normally “tax day” is April 15th (I always remember because it’s also my mom’s birthday.) But this year, you have until April 18th to file your taxes. That’s because the 15th is a Saturday, and the following Monday is recognized as a legal holiday in Washington, D.C. – Emancipation Day.
Getting a Tax Refund
The fastest way to file your taxes this year is by e-filing, and the quickest way to get your refund is through direct deposit. You can still elect to mail everything in and/or receive your refund by mail, but keep in mind this will take much longer.
If you want to keep updated on where your refund is at in the process, check Where’s My Refund on IRS.gov or the IRS2Go phone app.
Ready to file?
I hope you’re ready, mama! Tax day is right around the corner. Gather all your paperwork and W-2s, etc. and decide how and when you have time to file. Block out that timeframe to specifically dedicate to filing your taxes, and get down to business. Remember, the sooner you get it done, the sooner you can stop worrying about it! With all the available credits and deductions you may qualify for, here’s hoping you get some money back this year!
Until next time-
Ps: This post is part of our Adulting Series, an entire catalog of helpful guides on all things you need to know as a grown-up they didn’t teach you in school.