As those who have filed may already know, this year’s tax returns look a little different. There are more numbers, fewer letters, and a whole lot of confusion.
Andrea Coombes, a tax specialist at NerdWallet, helps you navigate the stress. Here are the best strategies based on your employment situation. (Warning: money may have to be spent).
If you have a regular job and no side-hustle (yet):
Take the standard deduction.
Given changes in the tax code, it may be especially difficult to determine whether or not you qualify for certain deductions, says Coombes. For the majority, the standard deduction will be the best decision, as it’s much higher this year— $12,000 for unmarried individuals, $24,000 for married joint-filing couples, and $18,000 for heads of households, meaning you’re more likely to save money with this option rather than itemizing, says Coombes. She adds that if you hate forms and are budget minded, it’s smart to use a service like TaxAct ($10-$50) or TaxSlayer ($17-57).
Online tax services have several other benefits as well. According to the IRS, the most common mistakes are simple thing like forgetting to sign the return or miswriting your social security number. Not only is this less likely to happen online, if mistakes are made, you’ll receive a much faster return than with paper. (And, despite hacking fears, identify theft just isn’t happening during tax filing, assures Coombes). So go digital, grandpa. It’ll make your life a lot easier.
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If you have a regular job, but also have additional income:
Get help.
On the software side, Coombes recommends TurboTax ($80-$200) because it’s the most intuitive and easy to use and H&R Block ($50-$90) because it has a wide variety of support options, but consider hiring a CPA who can offer better strategies, spot potential deductions, and provide financial planning beyond the scope of tax software. Ask the CPA questions like: Will I have free consultations throughout the year? Can you review my 401(k) and other investments? The National Society of Accountants estimates that for this tax season, the average fee for help with 1040s that claim standard deduction will be $188, while an itemized form with schedules will be $294. (Be organized, as 71 percent of practices charge extra fees if you show up without the right receipts or documents. Or if you have papers spilling out ).
If you’re self-employed:
Don’t leave any deductions on the table.
Filing your return is more complicated than following Ikea instructions. There are some valuable deductions you should pay attention, especially since some have changed. One is the “home office deduction,” which used to apply to anyone working from home, but now may be more difficult to qualify for, says Coombes. Another valuable deduction is the “20 percent pass-through deduction,” which can apply to self-employed filers or folks with freelance income or hire independent contractors. But, again, whether or not you qualify for these is especially complicated this year, notes Coombes. Another reason why you should seek help from a CPA. But it will cost: If you own a business or rental property, for instance, expect to pay between $400-$700, says a NYC CPA who wished to remain anonymous.
You may be paying out in the short term, but remember that in the end tax strategizing is all about the long game. This year might be the year to pony up and set a course for future savings.
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