As a CPA, you would think I would have no fear going into doing my taxes. Guess again! Taxes can be a super intimidating, even for someone who has experience with finances. So, in typical type A fashion, I wanted to give y’all a clear checklist to help you through the process and hopefully make it less of a painful experience.
This process is what I use when filing out my 1040, or the most basic return. This will work for a majority of people, but if you have some investments or other income, this may not work for you. If you have a more complicated return, you can still use these steps as a guide, but you may want to consider using a IRS approved tax preparer.
Step 1) Gather your documents
The easiest way to make doing your taxes as painless as possible is to start by getting all of the documents you need for it together before you start. Is there anything worse than realizing you don’t have a document need in the middle of filling out your return!
Here are some common documents that you will need if you are doing a 1040 (what the IRS calls the tax return form).
Type A Tip: I create a new folder on my computer clearly labeled 2019 Taxes where I save all of these forms. That way, I know where the forms I need are, and I also save a digital copy of my return here so I have a backup digitally just in case!
W-2s
W-2’s are documents that breakdown your income from the previous year. These will come from any employers you had in the previous year. So, if you changed jobs in the middle of the year, you will need to get a W-2 from both of your employers. Usually, these are mailed to you, but sometimes they can also be received from an online HR portal.
This is the main thing you will need for your return, so it’s something I try to get these as soon as I can in the new year. I elected in my last job to get them online, so once they became available, I downloaded them and saved them on my computer. If you don’t have this, you will need to reach out to your HR department at that company to get a copy of it.
1099’s
There are many different types of these forms (1099-DIV, 1099-INT) but overall these forms just show any other income you may have received in that year. These forms should also be mailed to you by the institutions who handled the transactions, so make sure you keep an eye out in the mail at the beginning of the year for these.
Also, if you are not an investor or don’t really do much besides contributing to your retirement accounts (like me), then you may not have these forms, so don’t freak out if you don’t get one in the mail!
Other Documents
These are less common, but could apply to you so if you have these, make sure to grab these forms!
1098
This is a document that shows the mortgage interest that you paid that year. Fun fact, mortgage interest is deductible from your taxes! Not that many millennials can afford to buy a home, but if you were able to, make sure you get this form so you can use it on your taxes.
W-2G
This form is what you need if you had certain gambling winnings for the year. I am not a gambler, hello risk adverse personality, but if you love to gamble or won big you may have one of these.
Please note, I am assuming here that you are not itemizing your deductions. That is a much more complicated process and for most people is not worth the extra work since they will not get more than the standard deduction. IF YOU PLAN TO, you will need to gather support and receipts for this.
Step 2) Understand the 1040
Gosh the IRS really loves numbers huh? For those who don’t love numbers as much as I do, the 1040 is just what the IRS calls the annual tax return form.
The form also looks really intimidating with lots of little boxes and lots of writing. So let’s break it down into sections:
Personal information
A majority, about 2/3, of the first page is just your personal information. This is where you fill out your name, address, social security and a few other questions. If you are not married, you will most likely be single. If you have a dependent or are a widow(er) you may qualify for another filing status, so check out the qualifications here.
Next, it asks if a few questions about dependents. These are usually children, but if you think you may have one review the criteria here. It also asks if someone can claim you as a dependent, so check and see if you are young enough or think that your parents are claiming you. I am 29 so despite the fact that I am living at home, I am not being claimed as a dependent on my parents 1040.
Also, there are a few interesting tax breaks for the elderly and legally blind. If you are either of those, make sure to check the boxes and get that benefit! FYI, elderly is over 65, so despite that fact that I feel ancient at 29 when talking with 22 year old coworkers about Tik Tok, I cannot say on my tax return I am elderly.
Financial information
OK, now we get into the financial stuff. Deep breath, it will be easy since you have your documents! For the first section, you will need your W-2. Then, just go down the numbers, and find the corresponding sections of your W-2 and enter the information.
Just take this slow, and go down the numbers and do as they say. If you run into issues, or have questions as to what it means, that’s when google comes in handy! Shockingly, some people love this stuff and do it for a career (who are those people?), so there are a lot of good resources out there. I have a few of my favorites at the end. Also, if you really want to challenge/torture yourself, there are instructions from the IRS for each section online.
At the end of this section, you will calculate your return, or how much money you will get back(or owe if its negative) from the government. Yeah money!
3) Helpful Resources:
Step 3) Know Your Resources
Ok, so now that you know what documents you will need and high level of what the 1040 form entails, I wanted to give you some quick resources to help you with this process.
Preparation Sites
So its not shocking that many people don’t like doing this form themselves, so there are a ton of online resources that will help you file your return, some even for free! So here are a few that I have used in the past.
E-file – The government run website, helps with basic federal return filing only. Easy if you have a basic return
Turbo Tax – The main benefit here is that this software asks questions throughout to see if you should itemize or if you have any other deductions based on life events. It also does both federal and state returns, but only federal is free.
EZTaxreturn.com – This is what I have used the past few years, simple federal returns are free, and state returns are 19.99. Will also ask you questions and walk you through the process of filling out the returns to make sure you did it right.
FreeTaxUSA.com – Never used this one, but its registered with the IRS, and the federal is free and state is only $14.99. This one has a high customer rating as well, so it looks like a good cheaper option as well!
Other Resources
Breakdown of 1040 line by line
Ok, so I know that was a lot, but now you should have some more knowledge about the return, what you need, and some resources to help you if you get stuck. Just take a deep breath and take it slow, and if you have a question, ask someone whether it’s through one of the services above or even your parents or a professional. Just think about the end result, money in your pocket!
