Oh, hi tax season. Even though I cover personal finance topics for a living, you still sneak up on me every year. Even if you don’t run your own business, or have complicated taxes, filing online can be intimidating. While more of a hassle than say, returning a package, filing your taxes online doesn’t have to be overly complicated, if you plan properly and leverage great technology like TurboTax free filing online.
In the article below I provide a step-by-step guide to filing taxes online with the TurboTax free software and cover some common questions many of you have about doing your taxes yourself and the online filing process.
I recommend breaking down the entire tax process into smaller 1-2 hour chunks over 2-3 weekends prior to the filing deadline of April 18th. (It’s a Monday in 2019!) The guide you’ll see below allocates tasks and to-do’s for each of these days over a three week spread. While this seems like a lot, trust me, it isn’t and it will save a lot of headache and stress if you work little-by-little, over time, rather than try to cram it all in at the last minute.
Here’s an Example:
- Day 1 (Income + Expenses) – I double check how much I made, and make a list of all the W2's/W9's I'm set to receive. As they come in, I check them off the list. (this year, I put them in a file until I was ready to look through them.) I also go ahead and download any investment income, documents for my mortgage, and make sure I have health insurance verification.
- Day 2 (File your taxes) – I calculate up all of my expenses and things I want to deduct. I make sure my spreadsheets are accurate and that I have paper copies (in case of an audit) organized and in one place.
- Day 3 (Final Review) – I put it all together and hunt for any missing pieces (if any.)
Plus, the earlier you file, the sooner you’ll get your refund (if applicable)! How’s that for incentive?
Filing Your Taxes – Day 1
- Make a checklist of expected income
- Record and file any receipts for expenses you plan to deduct
- Decide how you’ll file
- (If applicable) Sign up for a TurboTax free account
Make a Checklist
If you are the type of person who works for one company and that is your only source of income. Great! Your checklist of expected income should be pretty short: Just your W2 from you full time employer.
This is why come tax time (although if you’re self employed, you ideally do this throughout the year), I make a list of all the documents I'll need:
- who I worked for
- how much I made
- my retirement interest documents
- My mortgage interest payment tax documents
- Anything else you think you’ll need to show a form for
…And I create a handy written checklist and cross them off as they come in. It helps keep me sane, and allows me to track who I need to follow up with if I don't receive something on time.
The due date for W2's and 1099's is January 31st, so if you don’t have a form by early February, follow up.
Compile Receipts for Deductions
First, what is a deduction?
Deduction is just a fancy word for “things you bought that will lower your total taxable income” think: mortgage interest, childcare, medical expenses, charitable donations (More information here.)
Everyone filing taxes in America gets a standard deduction based on their tax status: single, married filing jointly, married filing separately, or head of household. Due to tax reform passed in December 2017, people now qualify for a higher standard deduction. (Limits and information on this here.)
Essentially, if you are single and think the total of all your itemized deductions is less than $12,000, it benefits you to take the standard deduction, which eliminates the need for receipt chasing.
If, however, your deductions total more than $12k, you should itemize your deductions to lower your total taxable income.
If I itemize, do I need all of my receipts?
You can deduct expenses without a receipt, but I wouldn’t recommend this. If you get audited, you’ll have to prove that expense was indeed a tax write-off and you could get in lots of trouble.
The “average joe” taxpayer with one employer taking the standard deduction is fine, but if you’re self employed or have some other element of your taxes you are uncertain about, it’s best to keep as detailed records as you can. Here’s a great list from Bench.co on what to keep and when if you’re self employed.
Decide How You’ll File
Here are the options for filing your taxes:
- Filing online yourself using any number of software platforms (TurboTax is -in my opinion -the best, most-intuitive in the industry)
- Hiring an accountant
- Or you can walk into a tax firm (like an H&R block) and have them work with you
Full disclosure – I DIYed my own tax returns successfully until I used federal grant programs to fund my house in 2013. The complicated tax rebate I received for renovating a historic home made my head hurt, which is why I chose to engage with an accountant. It worked out great, and made the process super easy for me, but it did cost a couple hundred bucks.
(And P.S. You’ll still need to compile everything to turn over to your account. They don’t dig through receipts like you see in the movies.)
For those who have more straightforward finances, (even if you side hustle) I recommend doing your own taxes. It is substantially cheaper.
Sign Up for a TurboTax Free Account
Here is an unbiased review of TurboTax from NerdWallet of the benefits in case you're on the fence.
You can get a free TurboTax account here.
How much is TurboTax?
TurboTax is completely free to file both federal and state tax returns but only if you don’t need to file any Schedules. (Here’s a list of schedules and why you may need to file them.) For most people with one W2 who are planning to take the standard deduction, TurboTax “free” version works just fine.
Should you need to upgrade, yes, it is pricier than other tax software on the market, but I love how easy it is to use the software. All plans also come with a 100% accuracy guarantee. In 2012 when I used them and ended up having to pay for a W2 that was missed, they refunded me the full price for my filing that year.
How easy is it to use TurboTax?
Easier than just handing off papers to an accountant? No, but the cost savings are pretty significant as you can file your taxes, even if you’re self-employed, for as little as $70.
When Should I Consider TurboTax Live?
if you feel your taxes are….uhm…. a bit more complicated (more complicated than a freelancer’s taxes, you say?)…. TurboTax has now unveiled a new product, TurboTax Live designed to provide live assistance from a credentialed tax expert, on demand. (You’ve probably seen various television commercials for this feature already!)
If you’re the “learn as you go” type (I am) you can go through the software and then sign up for “Expert Review” at the end. What this means is that once you’re done preparing your taxes, you can have a tax expert review your taxes for accuracy, sign and file. (Normally, this is what an accountant would do for you to “certify” it’s been officially prepared.)
Having an expert review generates peace of mind for you, and it comes with the TurboTax Maximum Refund Guarantee plus a 100% Accuracy Guarantee if you use Expert Review.
Here’s what the screen looks like.
Filing Your Taxes – Day 2
On the second day, after you’ve gathered up all the information you’ll need, it’s time to begin filing your taxes. Log on to your TurboTax account to get started. Below I’m going to go through how to file for beginners, and then do a second tutorial for those who are self-employed.
Skip to self-employed tutorial.
How to File with TurboTax Free
Login. First, you’ll be asked to fill out personal information (Your name, address) and then to answer questions about your tax situation this year.
You’ll go through screen-by-screen filling in the information related to you:
- Wages & Income
- Deductions & Expenses
- Health Insurance
- Other Tax Situations (if applicable)
- ….and finally a Federal review.
Once you’re finished with your Federal return they’ll use that information to pre-populate all the information into your state tax form. After double checking all of that information, you should see a screen like this.
Then a final screen to double check the results.
And then you’re clear to file!
Okay – all done! Skip to the conclusion of this article.
How to File Self Employed Taxes with TurboTax
Step 1 -> Tell TurboTax about your tax situation
As you can see, TurboTax is stepping up their game quite a bit, and you can now select a variety of options. This is way more advanced than what they offered even just a few years ago, and I was excited there was a button for every scenario I encountered this year, between my multiple streams of business and rental income.
I selected “Single”, “Own a Home”, “Own a rental property,” “Maximize Deductions” and “Own my own business/independent contractor.” PHEW!
Step 2 -> Select Your Plan
Based on what you’ve told them about yourself and your filing status, TurboTax will make a recommendation on the type of product you should use. I selected the “Self Employed” product for just $89.99.
Step 3 -> Tell them More About Yourself & Your Financial Picture
You can already see how easy and self-guided this is.
On the next two screens you’ll answer questions about marital status, and the kinds of financial transactions you engaged in over the course of the year. One important thing to note is that if you are self-employed and did not work with a company as a contractor, you won’t select the “I Had a Job” button.
Step 4 –> Enter in self-employment information.
At this point they’ll do a “check-in” and it looks like this. If all looks good, continue. (But don’t worry, you can change it later if you need to!)
Step 5 -> Finish entering in your personal information.
When you’re finished, TurboTax will recommend a filing status for you and do a summary of all your personal information. If all looks good, click continue!
Step 6 -> Choose How You’d Like to Enter in Your Information
Okay, here’s where you get to pick and choose. In one option, you can have TurboTax self-guide you, or you can choose what you want to work on.
Which one you choose really depends on if you’re the type that sits down, files their taxes, and has all the paperwork organized and ready to go so you can answer the questions. (Which, if you’re following this guide, you should be!)
If you’re working on your taxes little by little, you can choose your own sections to work on as the information becomes available to you.
Over the next few pages you’ll confirm your business name and address, and if you paid any wages. Wages apply if you have full time employees you pay with a W-2, or if you pay contractors (they’ll need a 1099.) TurboTax has the option to create these for your staff if you haven’t already done so.
Step 7 -> Enter your EIN, Lookup Your Business Code, and Answer Questions About Your Accounting Method.
Keep going until you hit the business summary page. It will outline for you all the sections you still need to work on!
Step 8 -> Enter in Business Income
So, here’s where it gets a little more involved. As a business owner, you should keep a simple Profit + Loss sheet totaling up how much you make and how much you spent on the business for each month of the calendar year. If you use an online accounting software for invoicing and expense tracking, they should did this for you. I like to keep my own and I update it monthly. Here’s a great template if you don’t already have one.
Step 9 -> Enter in if you have any inventory.
Step 10 –> Enter in business expenses you’ll be claiming.
They’ve listed all of their “common” business deductions so you don’t have to worry about remembering them all. TurboTax will walk you through both mileage and home office deductions with ease.
Step 12 –> Enter information about your business assets.
Step 11 –> Review all information and file.
This is the way I've found it works best for me and I recommend doing it this way so it doesn't get overwhelming and you're not attempting to put it all together….all at once. How do you eat the tax elephant? One bite at a time!