You’re the Taxman
By Saghir Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities.)
What if the best person to prepare your taxes was you? More than half of filers pay to have their taxes done. A basic return costs nearly $200, on average. But if your finances are simple, why not do it yourself. So, grab your W-2 or your SSA-1099 and take some deep cleansing breaths. With these five steps, you’ve got this.
Pick your program. Gone are the days of pencil, paper and complex tables. Nearly 90 %of tax returns are prepared and filled electronically now, and for good reasons: the software is good, errors rates are low and your refund, if you’re due one, arrives faster. You shouldn’t have to pay much for software, or at all. Credit karma (creditkarma.com/tax) lets you prepare and file state and federal returns for free, in return for targeted ads and offers. You also might be eligible for software through the IRS free file program (irs.gov/free file). You’ll typically qualify if your income, minus retirement plan contributions, is $72,000 or less (State returns might require a small fee).
Collect paperwork. Look at prior years, federal and state returns, this will point you to the info you need for this year returns, particularly if not much changed for you financially in 2021. Next, gather your 2020 documents, this include wage and income statement such as your W-2(if you had employment income),1099 forms (For investment income, freelance work, Social Security and retirement account withdrawals), and records of any retirement account contributions. If you need additional documents, your software will tell you.
Know what’s new. The federal government has rolled out some new tax breaks for the 2020 tax year, including a $300 deduction for cash contributions to charities even if you don’t itemize deductions. Also, you can now make traditional IRA contributions past age 70½ (provided you had earned income during the year).
Dive in. “ You don’t need to be a number person, “No need to be in fear!” Most tax-prep programs operate interview-style, guiding you step by step through the data that you need to enter. All you have to do is type in the numbers and other information; the program does all the math. It will even flag possible input errors.
Get help if necessary . If you’re stuck or have nagging doubts that something isn’t right. (VITA) program, which offer help to those earning $57,000 or less, or it’s Tax Counseling for the Elderly (TCE) service for those age 60 and older (irs.treasury.gov/freetaxprep). If you have trouble getting the help you need before 15 April, use IRS form 4868 to get an automatic six-month filling extension (though if you don’t pay any tax due by April 15, you may owe penalties and interest on your ultimate tax bill).
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
