Here’s What You Should Know About Filing Your 2020 Taxes
March 11, 2021
You believe in doing things differently than they’ve always been done…why not your taxes? The 2021 tax season is here, and whether this is your first time filing taxes on your own or you’ve been slogging through your files for years, you can make this tax season your best (and most stress-free) yet. Say goodbye to long nights of frustration with our guide sharing everything you need to know about filing your 2020 taxes.
The Basics: How to File Taxes
You have options with everything else in life (like doing happy hours over Zoom or IRL), and tax season gives you the same options… although they’re much less fun than scrolling for hours. You can either file taxes on paper yourself, use tax software or an online program, visit a tax professional in person for a short consultation, or hire a certified public account or agent. Choose the option that makes the most sense for you, depending on the support you need and the money you can spend. If you’re under 24, give your parents a call to ask if they’re claiming you as a dependent on their tax returns to avoid any future headaches.
Paying for tax software or hiring a professional will have monetary costs, but you may decide those fees (usually from $50 to $500) are worth a hassle-free filing season. Was your adjusted gross income $72,000 or less? Take advantage of filing your 2020 federal income taxes for free with IRS Free File.
If You Hire a Professional Tax Preparer
There are a few reasons you might decide to outsource and hire a certified public accountant or agent, from having major changes like marriage or divorce that make taxes more complicated to simply wanting to save time. If you decide to hire someone else to do your taxes, make sure to do your research to find a professional who’s reliable and trustworthy. Simple online searches of nearby tax preparers will show you your options, their qualifications, and even their ratings. The IRS requires all paid tax preparers to have a Preparer Tax Identification Number (PTIN), so ask if they meet this requirement.
Double-Check Your Paycheck
Before you begin filing your taxes, check the withholding amount on your pay stub so any taxes owed aren’t a surprise. If not enough taxes are withheld from your paycheck, you’ll owe the IRS at tax time. If too much tax is being withheld, you’ll get a refund. Use the IRS tax withholding estimator to check your paycheck, especially if your financial situation changed in 2020.
Check for Tax Deductions
Did you freelance this year or work from home for the first time? Make sure to check with your certified public accountant or search online to see deductions you can include with potential deductions like direct expenses in your home office or business-specific software. If you’re working with a tax professional, they may be able to help you find even more deductions you don’t know about.
Get Your Forms Together
You’ll know tax season has arrived when your mailbox is full of W2s instead of impulse purchases. Keep all of your forms together in one place so you can keep track of everything and see if any forms are missing. If you see that you’re missing a W-2 or 1099 form from a current or former employer, contact them with plenty of time to receive it by mail or print it.
Make Sure You Have Everything You Need
Whether you work with a tax professional or file on your own with software, you might feel overwhelmed at everything you need. You can find tax preparation checklists with the common needs for filing, so print a copy to refer back to. You’ll most likely need:
- Social security numbers and dates of birth for you, your spouse, any dependents
- Bank account number and routing number if you’re depositing your refund directly into your account
- W-2 forms for you and your spouse
- 1099 forms for different situations including unemployment income, independent contractor work, payments from IRAs or retirement plans, income from the sale of a property
- Forms that can adjust your income including Form 1098-E for student loan interest paid, Form 1098-T for tuition paid, self-employed health insurance payment records
- Documentations for deductions including child care costs, education costs, charitable donations, medical and dental expense records
- Taxes you’ve paid including state and local income taxes, real estate taxes, personal property taxes, vehicle license fees
This list isn’t comprehensive, but it will serve as a great starting point as you begin to get everything you need together.
Looking to Next Year
While you’re filing your taxes this year, there are a few simple steps you can take to make life much easier for your future self. Trust us, 2022 you will thank you for the small actions you do today.
- If you don’t have one already, start a spreadsheet to track your income. This will be especially helpful if you freelance or maintain multiple streams of income, and when next year’s tax season rolls around, you’ll be able to quickly find each gig and make sure you have the forms you need.
- Keep a dedicated folder to store all of your W-2 and 1099 forms so you don’t have to scramble to find them when 2022 comes around.
Change the Way You Do Taxes and Choose the Better Way to Bank
In 2021, you can change the way you do taxes and instead of feeling overwhelmed by tax season, you can feel empowered. Sounds good, right? That’s our mission too. At Flyp, we’re building a better banking solution that teaches you how to make the system work for you. We want you to trust your bank again, so get on the waitlist to be the first to join a bank that treats you like family with no-fee spending with a debit card, access to zero-interest micro loans, a free overdraft program, and more.
Flyp is not a bank. Banking services provided by Sutton Bank, Member FDIC.