If you haven't filed your 2019 taxes yet, I hate to tell you, but you're a little late. Taxes are normally due April 15th of each year (for the previous year), but they were extended this year until July 15th due to coronavirus and economic instability.
So your taxes were due last week. If you don't owe the government money then you actually don't have to file! You can also file late in that case with no penalty (for up to three years). The government would love it if you don't ever file so they get to keep your refund money.
On the other hand, if you owe the government money and don't file on time, you will be fined either $210 or however much you owe them (whichever value is less). Read here to find out more about the punishments for ignoring the IRS. This ranges from owing large amounts of money to going to jail. Either way, it's really not ideal. And no matter what, the punishment for not FILING taxes is much worse than the punishment for not PAYING your taxes. So even if you can't afford to pay right this second, you should always file on time. The IRS also provides payment plans if you can't pay all at once.
Okay, so anyways, we're all on the same page. We should file our taxes! But how?!?!? Maybe you've never had to file before, or maybe your dad always did it but never told you how. Well, you don't need to be a middle-aged balding man to do taxes.
I'm going to start off with a few simple questions that it took me a long time to understand.
Q: What are we actually filing?
A: We are sending in a fancy form called a 1040 into the government. The Internal Revenue Service will look it over, make sure you paid them the correct amount, and hopefully give you the a-okay. There are additional forms called Schedule 1, 2, 3, and A, which you might have to fill out if certain things apply to you.
Q: What happens if I hugely screw something up?
A: I've been doing my family's taxes for a while, and I've actually royally messed up their taxes quite a few times. You won't be automatically thrown in jail. However, they will contact you (very annoyed) and inform you of your stupid mistake. You'll have to fill out more tax paperwork to correct the error, which they'll process. Then try not to make the same mistake the next year.
A: Roads, public schools, clean water, medicare/medicaid, social security, food stamps, transportation. And so on and so forth.
Filing taxes is actually really easy. However, you will need.....
Patience. It's not super fun and things might not go your way. Deep breaths. Hmm.
W-2 forms. Any companies you worked for last year need to send you this paperwork by 1/31. If you don't receive it by 2/15, you should contact the IRS and they will get it for you. A W-2 is important because you need to know how much money you made and the company's ID number.
Get together other paperwork from throughout the year, such as records of donations you've made, information on your student loans, mortgage, and investments. Most investment and loan companies will provide you with this information in one simple document (for example, by logging into Fidelity and going to "Tax Forms and Information" under "Accounts & Trade").
Your social security number, name, address, how many children you have... Just the basics.
Then, your only decision is how to actually file your taxes. Back in the day, everyone filled out their tax forms by hand and mailed them in to the government. Luckily for us newbies, there are much simpler and more sophisticated options today. Most Americans qualify for free tax filing one way or another, but it's a matter of convenience vs cost.
Option 1: File for free online.
If you make less than $69,000/year (and are not self-employed), you have tons of free tax filing options online. This awesome site published by the IRS details your options and the requirements: https://apps.irs.gov/app/freeFile/. Most of these options will walk you through your taxes easily and quickly, helping you pay the least taxes you can. If you make under $69k, you should NEVER pay to complete your taxes (federal or state)! Big tax companies often get away with charging you if you use a wrong/generic link instead of their free link, so click carefully. It's best to go through the IRS site. They even have a little survey to tell you what your free options are, based on age and income.
Note: If you make less than $56,000 you can receive free, reliable tax advice through the IRS's Volunteer Income Tax Assistance (VITA) program. They can answer any questions and help you file correctly.
If you make more than $69,000/year, it's still possible to do your taxes for free. You'll have to use "Free File Fillable Forms" (yeah, that's the official government name for it) at www.freefilefillableforms.com. They're basically the paper tax forms but online. They don't offer much/any guidance to help you find deductions and minimize your taxes. It is quite possible to do it without any knowledge of taxes, but will require some googling and asking around for help. You'll want to plan extra time for taxes if you go with this option. In addition, you can only do your federal taxes this way. You'll need to file your state taxes with separate paperwork or pay to do it with fancy software (see #2).
Option 2: Pay to file using tax software like H&R Block or TurboTax.
If you make less than $69,000, see option #1. Taxes are likely free for you!
Otherwise, you may want to pay to file your taxes with reliable commercial software. It'll walk you through the process, file your federal and state taxes, and help make sure you don't mess anything up. This generally costs $65 to $110, although it could be more if you end up needing special assistance, or "premium" tax features, or need to file state taxes for more than one state, or are self-employed, etc etc.
My family has always and will always use H&R Block. In general their prices are lower than their competitors'. Do the research yourself and see which tax software best fits your needs!
Option 3: Use an accountant.
If you would like to take a truly hands-off approach, you can hire someone to do your taxes for you. This costs an average of $176 to file federal + state taxes with a standard deduction (not itemized). It can be much higher if you live in a city, have more complicated taxes (with dependents / a mortgage), or want a more experienced accountant. This IRS search tool will help you find a qualified tax preparer near you.
Taxes aren't fun, I won't lie. However, clicking Submit and getting an approval email feels pretty good. So does getting a refund. So does getting a stimulus check. So does getting a pothole on your road fixed. Revel in the good parts about taxes and get them over with as soon as possible! Then go buy yourself some ice cream and wait for next year. They'll be back!
P.S. Hamilton is so amazing and I highly recommend borrowing a Disney+ log-in from a family friend to watch it. It's well worth the 2.5 hours of your time.