How To Calculate Your 2017 Taxes, Because It's Not As Simple As Ivanka Says
With all the talk of the GOP tax cut bill, you might find yourself wondering how things will work next year. The Republicans promised a tax code that would be so simple that you could do your taxes "on a large postcard." Don't get your hopes up, that promise wasn't kept, and calculating your 2017 taxes will be just as complicated as ever. And it's due April 17.
For one thing, the tax bill hasn't even taken effect for this year. Your 2018 taxes aren't due until April 2019, so we are working with the old rules for a while now (although make sure to check out a guide on the new rules to make sure your 2018 spending is in line for the proper deductions).
The main thing that you'll want to do to figure out your taxes is to collect the important paperwork. One of the key items for individuals who work as employees is the W-2 form. It includes all the wages that were paid to you by your employer, what they spent on your Social Security and Medicare contributions and other payroll taxes. It also spells out what state and local taxes were withheld from your paycheck during the year. This must be given to you by Jan. 31.
The other two forms to look out for are forms 1099 and 1098. The 1099 will detail any work that you did on the side over $600, perhaps a freelance project above and beyond your normal job. The 1098s only apply to you if you have an expense like a mortgage or student loans that you are paying off. The 1098s are particularly great because they can be used to reduce your tax bill (probably the only positive to come from student loan repayment ever).
If there are any other sources of income, it's important to gather how much that was. Things like Social Security benefits or unemployment are taxable. Also, anyone who got insurance through the Affordable Care Act individual marketplaces, make sure to gather the appropriate forms on how much your premium tax credit totaled.
When you have all that gathered, you'll need to decide how to do your taxes. You have three main options: going to a tax professional, using online software, or using the old fashioned paper forms. In all three cases, you'll want to have the W-2s, 1099s, 1098s, etc. at the ready. If you choose to use a tax service like a certified public accountant or a tax lawyer, they will take it from there, asking for receipts and other documents that can be used to increase your deductions (and therefore reduce your taxes).
If you decide to use an online software, make sure to try and get a free one. Many states and the federal government require that software providers offer a free option for e-filers that make under $64,000 or so. Google "free e-file" and your state to find an option that will cover your state taxes as well as your federal.
If you decide to use the old fashioned paper forms, you're definitely up for the biggest challenge. You'll need to take out a calculator and follow the directions carefully. Another good option can be to use the fillable forms on the IRS website (when they become available in January). It's essentially the same thing, but it does the math for you.
No matter how you file, make sure that you include all the possible information and that that you double check the numbers. Keep copies of everything, too. Filing your taxes might not be easy, but it's far better than an audit.