If you live by the old Ben Franklin quote, you know the only two things we can count on are death and taxes. But with a little planning and organization, you can make one of them easier to manage. I’m talking about the taxes.
Here are seven hacks that can make tax season a little simpler, ranging from “I should have known that!”-level to stuff that’s not as well known. See how many you recognize in this slideshow, and how many you can apply to your next tax return.
You’ll see a wide range of prices for tax preparation services, whether you want to sit down with a professional or use a guided online program.
But you might not realize that you’re probably eligible for some free tax-prep services, whether for federal taxes, state taxes or both.
Eligibility requirements vary, but in general, if you’re in your 50s or below and have an adjusted gross income of $70,000 or less, you’re probably eligible for at least one of the free options. Some don’t even have income caps anymore—Credit Karma, for one, offers tax preparation free to all.
Since the Tax Cuts and Jobs Act dramatically increased the standard deduction, you might not think it’s worth trying to deduct your donations to nonprofits. But it’s still worth keeping track of those receipts and thank-you letters.
That’s because the rules can sometimes change in your favor. For example, when you file your 2020 tax return, you’ll now be able to deduct up to $300 of charitable contributions, even if you take the standard deduction.
That may not help you today, but it could improve your tax situation next year. Dig out those wrinkled donation receipts you didn’t think you’d ever need and file them away for safekeeping!
If you or your spouse received unemployment benefits, keep in mind that those payments are taxed as income.
“While recipients have the option of withholding tax from their unemployment benefits, many choose not to withhold,” said Alison Flores, principal tax research analyst at The Tax Institute at H&R Block.
She said that if you don’t have those taxes withheld, you could be looking at a tax bill or a reduced refund when it’s time to file your annual return.
It’s not something you can prevent dealing with if you already got those untaxed unemployment benefits. But being aware of any taxes you may owe the next time you file can help you prepare for the potential costs involved.
If you have student loans, I’m going to go ahead and assume you hate paying that bill each month. But there’s a tax deduction you can take during every year you’re paying down that debt. (Small consolation prize, but hey.)
You don’t need to itemize your deductions in order to take the deduction for student loan interest paid in the previous tax year. Doing so could reduce your tax bill by as much as $2,500.
Look for Form 1098-E from your student loan servicer to determine the amount you can deduct.
This one might cause a headache now, but can prevent worse ones down the road. If you earned income on top of a W-2 paycheck, like for a gig you performed as an independent contractor, you need to report that income—even if you didn’t get a 1099 for it.
“All income, no matter the amount, earned through a business, as an independent contractor or from informal side jobs, is self-employment income which is fully taxable and must be reported,” Flores said, “If you earned at least $400 income through a business, as an independent contractor or from informal side jobs as a self-employed individual, you must also pay self-employment tax.”
Sure, if you made a few bucks mowing lawns for your neighbors, you can probably get away without reporting that income. But you’ll want to make sure you report anything that has a paper trail (digital or otherwise) to avoid the chance of an audit.
It can be scary to be faced with a tax bill, especially if you didn’t expect it. But don’t panic. While yes, you need to pay Uncle Sam eventually, you don’t need to do it all at once.
The IRS offers payment plans if you owe taxes. Just like a loan or credit card, you pay interest for the privilege of spreading out your payments. And you’ll pay a setup fee to get started. But paying in installments is way cheaper than the penalties for not paying at all—and your tax payment plan isn’t reported to the credit bureaus.
If you still can’t find the forms you need or you’re putting out fires elsewhere in your life, Tax Day can creep up on you. But it’s easier than you might think to request an extension.
You can file Form 4868 or submit an electronic request, which will bump your annual return filing deadline all the way back to October. But you’ll need to pay any tax you owe when you request that extension, so be prepared to pay up by Tax Day (typically around April 15, but bumped to July 15 this year) or set up one of those payment plans we just mentioned if you know you’ll owe.