Have You Filed?: The Basics
Well, helloooooo - we are finally back & tomorrow is January 31st! Time flies when you work every day, right? By tomorrow, you should have your 2021 Form W2 or 1099. So, today we’re going to talk a little about filing your taxes and what to expect. Every year, it seems like tax law is changing. The first in our new tax season series, Have You Filed?, we are going to discuss some of the basics today that can help you navigate this tax season. Below are some questions you should ask yourself.
What is your filing status?
Single – If by December 31, 2021 you were not married OR you were legally separated, this is your filing status.
Married Filing Separately – You are married and you and your spouse file separately. You will only be responsible for your income tax. This is useful if filing separately will result in a lower tax liability.
Married Filing Jointly – You are married and you and your spouse file together – combined income. One tax bill, one tax refund…whichever applies.
Head of Household – A lot of people misconstrue this filing status. To be eligible, you must be unmarried as of December 31, 2021, you paid more than half of housing costs throughout the year, AND a qualifying person lived with you more than half year. This could be a child or even a parent.
Qualified widow/widower – You will be able to use this filing status for two years following the year of the death of your spouse and you must have a dependent child. This just allows you to benefit from the “Married Filing Jointly” status.
Deduction or Credit?
Deductions – A tax deduction is just as it sounds. It is a reduction in the amount of taxable income. If your taxable income is reduced, your tax liability will also be lower.
Credits – A tax credit decreases the amount of taxes you may owe or may increase your tax refund, if applicable.
How to file your taxes?
· You can do it yourself! – This is what I do. I know, it’s scary to a lot of people because you hear horror stories about people owing back taxes. But, it’s actually pretty easy if you are filing a simple return.
· Go to a tax professional. If all else fails, go to an expert to seek help. They will able to file for you and submit to the IRS.
Thanks for reading as always – we hope this has provided you with some insight. During the month of February, we will dive deeper into filing taxes by looking at credits, deductions, disclosing income from your legal side hustles (like DoorDash, Uber, Lyft, etc). So, hopefully by the end of this series you will be more comfortable with tax filing. Remember, the IRS is now accepting returns to be processed and the deadline to file is April 18, 2022. So, get ready! Write to you soon!