Transcription
In today's video, I will teach you how to do taxes for beginners. So, we're talking about your personal income tax return with the IRS. If you know little or nothing about how to do taxes, then you are at the right video. So, I welcome you.
Now, let's start with this. Let me tell you why you get a tax refund or owe money to the IRS. So, the federal government needs money for the military, federal employees, health programs, interest on national debts, foreign aid, you name it. And all of these expenses are paid for by you and me, the taxpayers, through income taxes.
So, let's say that you're an employee working at a company. Your employer takes money out of your paycheck for taxes, right? So, your employer does not keep that money. No, they send it to the IRS on your behalf. So, how much money does your employer take out of your paycheck? The answer is that that depends on you. You decide. You tell your employer how much money to take out of your paychecks. You did this when you filled out your W-4 tax form before your first payday.
Now, when it's tax filing season, you're going to fill out your tax return. You will report all your income. You're going to claim as many tax deductions and credits as possible. And then you're going to see how much tax you owe for the year. And let's just say in this example that your tax for the year is $10,000. But you have to remember that you've been sending in taxes from each one of your paychecks, right? So, if you sent in more than $10,000, then you will get a tax refund. In this example, your overpayments will be refunded back to you. If you sent in less than $10,000, then you will owe money to the IRS. You will have a tax balance due. So, that's how this works.
Now, let's talk about how to file your tax return. So, you're going to have three options. You can pick whichever is best for you. Option number one is the old-school method, the traditional way. So, you can print out the tax forms from the IRS website, you know, bust out your calculator and start filling out the forms manually. I do not recommend this because you can miss forms, you can commit math errors, it gets real messy.
So, option number two is, well, you can have someone else do it. But of course, if you're if you're going to go down this way, then you'll have to pay for, you know, this type of assistance. Normally, there are tax preparation chain stores like we're talking about H&R Block or Jackson Hewitt, you know, to name a few. There are tax accountants with their own tax practices. If you choose this route, then, you know, I recommend that you check the reviews on Google or Yelp or wherever. If you have a family member or friend do your taxes for free, just make sure that, you know, they they know what they're doing.
Option number three is to do it yourself with tax preparation software. So, TurboTax is the most popular option. H&R Block has their own software. There's TaxSlayer. There's a lot of software out there. If your situation is straightforward, then many software providers let you use their software for free. So, you may be eligible for their free filing. So, TurboTax offers that. So, take a look at this. TurboTax says that 37% of taxpayers are eligible for free filing. So, full disclosure, TurboTax did not pay me to say this or advertise this. This video is not sponsored. I'm just familiar with many of the software out there. My opinion is that TurboTax does a good job. So, it has my stamp of approval.
Now, if you don't want to use TurboTax for whatever reason, you can visit the IRS website for other free software providers. So, the IRS has partnered with certain vendors to offer you free tax filing services. So, I'll show you. So, you go to the IRS website. It'll look like this. So, they might have moved around some pictures or, you know, changed the wording, but this is what you're looking for: IRS Free File. Do your taxes for free. So, you will qualify for the Free File if your adjusted gross income is below their threshold, which changes every year. And you can click here to see the free software providers. So, that'll take you to this web page, and you can browse all the trusted partners of the IRS and try out the one that you like.
Here's my recommendation as a certified public accountant that has done more than 10,000 tax returns: If your situation is straightforward, I would say try to do it yourself on software. Try to self-prepare. I think that that would be the best for you. So, a good question is, which software should you use? Honest opinion is that, okay, honestly, all the name-brand tax software out there will get the job done. So, personally, I like TurboTax. I think it's very user-friendly. I will leave a link for you down below, and you can see if you qualify for the free filing. I also made a tutorial video on how to file your taxes on TurboTax. So, like, I literally go through the entire tax return with you to help you fill it out from start to finish. So, I'm going to leave a link for you for that tutorial video down below as well.
However, if you're deathly afraid of taxes or if it's just getting unmanageable for you or too complicated, then you should consider working with a tax preparer. If you choose to do this, here's my advice to you: Contact the tax preparer and set up an appointment early. So, I'm talking about like January or February. Taxes will be due in April. However, most accountants stop taking new clients in March. So, the tax preparation stores might have some more availability, but even they can get booked up pretty solid in April.
Regardless of how you're going to prepare your tax return, here's what you need to do. Let's say that you're going to do your taxes for tax year 2023. So, you will need all your relevant tax information for 2023, right? And these tax documents will come from your employers, financial institutions, lenders, etc. So, here's how it works: These institutions are legally obligated to send you your relevant tax information so that you can report it to the IRS. And you'll receive the majority, if not all, of these tax documents in January or February. For a lot of these tax documents, you can just download them from your online accounts.
Now, you must know this part: These institutions send you a tax document, right? But they also send a copy to the IRS. So, for example, your employer gives you a W-2 tax form, and your employer also gives a copy to the IRS. If you make interest income, let's just say at Ally Bank, they'll send you a 1099-INT, and they'll also send a copy to the IRS. So, if you don't report something that is on your tax documents, then the IRS will know about it and send you a letter because everything is computerized, and they will know about the discrepancy. But if the amounts are minimal, like you don't report, let's just say $4 of interest income, then the IRS, they're not going to even bother you if it's not worth the effort to come after you. But if you fail to report something big that is documented, then yes, the IRS will come after you.
Here are the most common tax documents that you may receive: So, the W-2, this is your wages earned and taxes paid. 1099-INT, this is the interest income that you received. 1099-B, so this is for your stock sales and crypto sales. 1099-DIV, which are your dividends. 1098, that's the mortgage interest that you paid. 1098-E, this is student loan interest that you paid.
Now, let me end with this, and this is so important. This is probably the most important because this is a summary of what you need to do. So, there are going to be three steps. So, step number one is that you will fill out your tax return. And step number two, you will submit your tax return to the IRS. The most common way is to do it electronically. This is known as e-filing. If you prepare your own tax return, all the software out there will allow you to e-file. If you use a tax preparer, then they will e-file for you. Okay?
So, step number three is that if you're getting a tax refund, you can receive your money by direct deposit. So, you'll get your tax refund in about one to two weeks. If you owe money, you can pay the IRS on their website by the tax filing deadline, or you can set up dates for the IRS to debit your bank accounts.
Now, if you live in a state that charges state income taxes, which is most states, then it will be the same process with the state. But tax preparation software will automatically generate your state income tax return based on your federal tax return with the IRS. So, that is the entire tax filing process, and now you know how to do your taxes. Check out the links below, and if you have any questions, please leave them in the comments down below. I'm going to do my best to assist you. Thank you so much. Please subscribe, and I wish you a very nice day. Take care.