Everything You Need to File Your Taxes for 2020

Uy mij@, it’s nearing the end of February and you’ve got everything you need to file your taxes. So why wait? It’s only going to be more painful the longer you delay it, besides we need to focus on how to maximize that REFUND, and pay the IRS just their fair share, it’s been a crazy year, so lets make this experience something that works for us. We want  to get it in before April 15th, so when spring hits we are laughing our way to the bank. I know it can be daunting but SUMA is here to help!

Do I have to file taxes? 

Yes! It’s kind of a birthright. Not like the super human powers your abuela handed down to you where you can see everyone’s aura, but as a citizen, paying taxes are just a part of adult life. But having to file your taxes depends on your income, filing status, age and if someone else is claiming you as a tax dependent. 👶 Even if you don’t have to, you probably should. There are tax breaks you could qualify for and you might be due a refund! If you’ve had income tax withheld, made estimated tax payments or applied last year’s refund to this year’s estimated tax, you should seriously consider filing. It’s also better to have a complete tax file so the IRS doesn’t get suspicious in future years and flag you for auditing. 👀 Yes, let’s avoid that!

How am I being taxed?

We start with your total (gross) income and then subtract either the standard deduction OR claim any deductions you’re entitled to. That net income determines which tax bracket you fall into. The government uses a progressive tax system so it’s a higher tax rate the higher your income is. But they’ve broken up your taxable income into tax bracket chunks so you’re taxed on separate portions accordingly. For instance, if you fall into the 24% tax bracket because your income was between $85,525 and $163,300 then only the portion above $85,525 is taxed at the 24% rate. The portion below is charged at a lower rate! 😌

What can I deduct?

Some people will be just fine with the standard deduction. But if you are self-employed, or are earning income from multiple employers, you might want to itemize your deductions for a maximum refund. For self-employed, the rules have shifted on what business expenses are deductible so it’s important to keep clear records of everything and verify with the IRS or your tax professional on what can currently be included. These are some of the more popular deductions that anyone can take. 🤓

Medical and dental expenses para tu salud ⚕️

State and local income taxes 🧾

Sales Taxes de tu Shopping 🛍️

Real estate taxes 🏠

mortgage interest de tu casita(s)

Educational expenses being a jef@ 🏫

Charitable contributions generos@ 💸

Casualty or Theft Losses  

What about Tax Credits?

You can apply these Tax Credits to significantly reduce your taxes: Retirement savings account contributions credit, Child Tax Credit, and Lifetime Learning credits. 🧑🏽‍🎓The Tax Relief Act of 2020 is also providing immigrant families with Covid Relief stimulus payments with the Recovery Rebate Credit. A social security number is required. 🙌

What should I have ready to go? 

Make sure you have social security numbers, proof of income, W-2 forms, 1099 forms, and any supporting documents to back up all of your itemized deductions, such as property taxes, state and local taxes paid, and unreimbursed medical bills. It’s also a good rule of thumb to have last year’s federal and state tax returns on hand in case they need to be referred to. ✅

How do I file?

Like a genie in a bottle, you have three options to pay the tax fairy!

You can be bold and do it all yourself manually with Form 1040. Yes, this option is free but takes some work on your part. 😳 But don’t worry, if you’re not good with numbers, ask your primo – the math genio to help you complete the form according to the instructions from the IRS. Then just mail it in as well as any payment you owe. But beware, the IRS takes six to eight weeks to process paper returns. 😱 Why should we wait that long?? We’re breezing through this proceso like Speedy Gonzales this time, so let’s check our other 2 options.

You can use one of those nifty software programs, like Turbo Tax, H&R Block, TaxAct or TaxSlayer. Just make sure that you’re using an authentic, trustworthy program and not some black market copy burned on a disc! The last thing you want is bugs or privacy leak with your financial life on display 😨This option just requires you to answer some questions and it will fill out your 1040 accordingly. Easy peasy – this option can charge a fee, unless you have less than $72,000 adjusted gross income to qualify for the IRS Free File program for free tax preparation software. This process makes filing so much easier and your return should be processed within three weeks. ¡Así de fácil! 😎

Now if you’re feeling like a 007 spy with all the forms and deductions you’ve gathered from self employment and you want peace of mind with more seasoned guidance, you can hire a professional to do all the heavy lifting! This is the pricier option of the three, but still reasonable and varies according to filing status. An added bonus: an accountant or a dedicated tax professional will be able to maximize your refund as they will fill it out on your behalf. Take a load off! 🤑 And If you attend our next Dinero session-Taxes Edition, you will be entered to win a FREE 30 minute 1 on 1 consultation with a CPA. ¿Que esperas? Sign up now! There are 25 Free consultations waiting for you if you attend our session.

Whichever option you choose, make sure to have the IRS deposit your refund directly into your bank account instead of waiting on a snail mail paper check. For further peace of mind, you can also track your refund directly with the IRS. 🕵🏽‍♀️

What if I owe?

If you end up owing the IRS, you can pay electronically or with a wire transfer, and even with a debit or credit card. If you’re unable to pay them all at once, you can make an agreement with the IRS to pay over time with monthly payments. 📅

When do I file?

Now! Why wait? April 15th is the annual deadline but returns are accepted as early as February 12th. The sooner you file, the sooner you could get a refund. Think of the places you could go (somewhere tropical), the food you could eat (carne asada), the debt you can pay off (regalos de Navidad), or hey—how about the investments you’ll make?! Now you’re talking! Let’s get to it! 📚

If you want to learn more about how to make filing taxes easy peasy and ask any of your burning preguntas register for free by clicking the button below. We have tax experts from Contabi Alliance and Indiva Advisors on hand to help. Don’t miss out!