Save The Right Paperwork All Year Long
Stay on top of tax-related paperwork throughout the year it will make your life easier during tax season. You might want to keep receipts for things like charitable donations, work-related expenses and medical bills, or other items from step 4. You may also want to keep statements from student loans or investments and any grants or fellowships. Having these handy and organized can help you determine whether to itemize and make the process easier. You should keep your paperwork after you file, too. The IRS recommends keeping records for at least three years.
Sole Proprietorships And One
Sole proprietors and one-person small businesses, including one-person limited liability companies , can complete Schedule C to calculate their business incomes and include that form with their personal tax returns. It’s relatively simple.
You have a sole proprietorship if you own and operate your enterprise yourself. You might have one or more employees, but you don’t have any co-owners and you haven’t taken any steps to incorporate or form another business structure.
You have a single-person LLC if you’ve chosen this business formation as a legal barrier between yourself and your business debts and liabilities, but you have no co-owners.
Business income and losses “pass through” to you and your personal return with these business types.
A simple Schedule C for a sole proprietor is a lot different from a complex corporate or partnership tax return. If Schedule C includes the manufacture or sale of products that requires a cost of goods sold calculation, it gets more complicated, and there’s more possibility for error.
You might be just fine handling your own return if you have a very simple Schedule C operation with no employees and no products, and the IRS does make this a little easier for you in one respect. You can use the simplified calculation for the home business space tax deduction if you meet certain requirements.
The simplified home office calculation allows you to claim $5 for each square foot up to 300 that’s dedicated exclusively to your business.
How To File A Self Assessment Tax Return Online: A Step
Tim is an award-winning freelance financial journalist with 20 years’ experience. He has written regularly for a wide range of publications. He has also written for many organisations from large blue chips to small sole traders.
Do you need to file a tax return online before the Self Assessment deadline of 31 January?
Some people start early almost 100,000 people filed their tax returns on 6 April 2020 the first day of that tax year!
This time, instead of worrying and procrastinating, maybe its worth getting it done and dusted early.
But of course, we do realise it is a bit of a chore, so we dont blame you at all for sending your tax return a bit later than those early birds.
Filing it online can seem daunting but good preparation can take the pain out of the task.
If you need to file a tax return, well offer some tips on how to do it. Well also provide you with details about dates, penalties and allowable expenses, and look at why many businesses use an accountant.
That last part is important because were not claiming to offer legal or professional advice. If youre in any doubt, contact HMRC or a tax professional.
OK with that? Lets get started.
This guide to filing a Self Assessment tax return covers the following topics:
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Understand The Filing Deadlines
The federal tax filing deadline is typically on April 15. If that day falls on a mail holiday, it may be moved to the next business day. Tax returns must be e-filed or mailed by the federal tax deadline to avoid late-filing penalties.
In 2020, the federal government extended the filing and payment deadlines for 2019 taxes until July 2020. This was to provide some relief during the COVID-19 pandemic. As of now, the filing deadline for 2021 is Thursday, April 15. Whether or not such a change might be made in 2021 for the 2020 tax year is not yet known. So, keep an eye on IRS and tax news to understand when you need to file in 2021.
State deadlines may be different from the federal deadline, so be sure to check the filing requirements in your state.
Get Your Federal Tax Refund Fast
Not only have we tried to make it as painless as possible to prepare and file your return, filing electronically will also get your tax refund much faster. After all, it’s your money. Why wait any longer than necessary to get it back.
At E-file.com, we work to get your federal tax refund as fast as possible thanks to the electronic filing program with the IRS. Filing electronically with the IRS and selecting to have your refund direct deposited to your bank allows you to get your refund as fast as possible.
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Get Free Help If You Need It
When you do your own taxes online, your free tax-prep software should have a help center and customer support if you have any questions. If you still need assistance, numerous free resources are available to help you complete your taxes. Here are a few.
Individual IRS telephone helpline: 1-800-829-1040
Having Your Return Filed By An Accredited Person
You can have a person accredited by Revenu Québec file your return. Note that accredited persons who file more than 10 income tax returns are required to file them online.
Before having an accredited person file your return online, you must complete and sign two copies of the authorization form .You and the accredited person must each keep a copy of the form for a period of six years from the date on which the tax return was filed. Do not send us a copy unless we ask for it.
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What Are The Consequences Of Not Disclosing Online Income
In the more severe cases, online tax evasion could result in prison as was the case with a user in 2014 who failed to declare their eBay income. As HMRC has the authority to access PayPal information and request extensive details from online auctioning sites, its unlikely that such schemes will remain hidden for the foreseeable future. In 2016, approximately 870,000 people failed to submit a Self Assessment return with some cases having noticeably small amounts of income from online sales. This resulted in huge fines for the sellers, with HMRC predicting an increase for years to come.
Thankfully, completing a Self Assessment tax return has never been so straightforward. With GoSimpleTax software, you can see clearly what you need to disclose and how to avoid HMRC penalties. Our online and telephone support can guide you through the Self Assessment process so that it is accurate and transparent.
Interested? Trial our software to see how you can streamline your accounts.
Trusted by over 15,000 subscribers
You don’t need to be an expert to complete your self assessment tax return.
Types Of Tax Credits And Benefits
There are two types of tax credits:
Benefits can help with various living expenses, such as raising children, housing, loss of income and medical expenses.
Read the Canada Revenue Agencys General Income Tax and Benefit Guide and Forms Book to learn more about which tax credits you can claim.
With the Ontario Child Care Tax Credit, you could get back up to 75% of your eligible child care expenses. It applies to eligible child care options, including care in centres, homes and camps.
The Low-Income Workers Tax Credit provides up to $850 each year in Ontario personal income tax relief to low-income workers, including those earning minimum wage.
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Do I Need To Pay Taxes If Im On Online Seller
In 2016, the Finance Act empowered HMRC with snooping authority to compile information from internet selling sites on self-employed individuals who arent declaring income. There are certain elements to online selling that the government considers before defining something as a trade. They are:
- Intention to make a profit as opposed to selling for fun or raise small emergency funds
- Repetition of similar transactions over a short period of time
- Money is borrowed to buy an item intended for sale, only to be repaid once the transaction has cleared
- Inability to prove the items sold gave you a pride of possession before being listed
- The item is sold at a fixed price in a similar fashion to retailers
- Limited time between purchase and selling, bringing into question the ownership of the seller
- Modification of items in order to sell them for a greater profit.
For those still asking, do you have to pay taxes on an online business?, yes unless you feel that you arent necessarily breaching the above considerations.
Do You Need To File A Tax Return
For employees and pensioners, tax is typically deducted automatically at source from wages and pensions. But people and businesses with other income not deducted at source and above a certain level must report it in a Self Assessment tax return.
If you were self-employed as a sole trader in the last tax year and earned more than £1,000, you need to file a tax return. You must also file one if you were a partner in a business partnership or director of a limited company whose income was not taxed at source and/or have further tax to pay.
Even if your primary income is from your wages or pension, you may still need to send a return if you work in specific sectors, were paid more than £100,000 via a PAYE salary scheme, or have any other untaxed income, such as from:
- Savings, investments and dividends
- Foreign income.
You can also file a tax return online to claim some income tax relief or prove you are self-employed, for example, to claim Tax-Free Childcare or maternity allowance.
HMRC offers this if you are still not sure whether you need to file a return.
Nick Levine, former Head of Enterprise at the Institute of Chartered Accountants in England and Wales , offers some further advice: If HMRC has sent you a notice to file a return, you must complete one.
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Final Thoughts On Filing A Tax Return Online
If you decide to do it yourself but are still not sure of anything, you can always contact HMRC and ask them to ensure that you have the correct answer.
This is worth doing because you could be subject to fines and penalties if you complete your tax return incorrectly.
While many small businesses switch to using an accountant at some point, it could well be worth doing your Self Assessment for the first year at least as you will save some money and have a better understanding of how the tax system works in future.
The key to filing on time is planning. Squeezing in some Self Assessment preparation now will lead to a less stressful experience.
Editors note: This article was originally published in December 2018 and has been updated for relevance.
Can You Do Your Own Business Taxes
If you have a business, can you prepare your tax return yourself? Should you?
The short answer is âyes,â you can do your return yourself. There is no legal or IRS requirement that business owners hire a tax professional to prepare their returns.
That said, most business owners prefer to get tax pros to do their tax returns. Indeed, a majority of all taxpayers hire tax preparers. But this doesnât mean you have to.
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How Much Can You Sell On Ebay Before You Have To Pay Taxes
HMRC does not want to tax those just hoping to make a small amount on the side. In fact, in 2017, the government agreed to a trading allowance that gave sellers the freedom to earn up to £1,000 in sales without paying anything in tax. The aim was to simplify the tax system and to help the UK become leaders in the digital and sharing economy.
Its not just Ebay sellers that need to be aware of the potential tax trap, Depop, for instance, is a fast-growing community of young sellers that are making a living out of second-hand fashion. There are entrepreneurs earning thousands on the platform, unaware that they may have to pay tax as a sole trader. Gumtree and Etsy sellers are similarly affected by taxes when you sell things online all being recognised as platforms where sellers are able to evade paying tax, and are therefore in HMRCs firing line.
Find The Right Tax Filing Software
There are numerous tax software products to choose from. Take your time to review your options and determine which one suits your situation the best. These software products can easily be found online.
While some programs are designed specifically for personal tax filing, others are ideal for business tax preparation, and others can effectively handle both.
When you use tax filing software, you will typically be asked questions that are designed to ensure that you pay the right amount of taxes.
Moreover, most paid versions of these software products are packed with valuable information and education that will walk you through every step of the tax filing process.
If you have more questions or dont seem to understand some things, you can always find help from the IRS website. You also have the option of calling the IRS directly to seek help.
The customer service representatives at the IRS usually are very hospitable and helpful.
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Have A Copy Of Last Years Return
When you adopt the mindset that tax organization is a year-round activity, youll have easy access to all your tax documents, including returns from previous years.
Thats important because youll need information from last years return in order to complete this years return. Make a habit of printing or saving a digital file of your completed return every year for easy reference. Keep in mind that some online tax-preparation services may charge you to access previous returns.
If you cant access last years return, dont worry. You can ask the IRS for a tax transcript.
Review Your Documents From Last Year
When doing taxes yourself, you might want to review the information from your previous years federal and state tax returns. Much of the information will likely be the same, including employer federal ID numbers, childrens Social Security numbers, and even some of your credit or deduction options. The IRS also uses your prior-year AGI to verify your identity when you e-file, which means youll want to make sure you have the information you submitted last year on hand.
Starting with an old return can help you enter information quickly and accurately. One great tip for doing your own taxes is to use a software program such as TaxAct that can often import old tax data. That way you dont have to enter it again, which can save time and reduce the potential for typos and other errors.
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Can I File My Taxes Online For Free
In Canada, TurboTax makes it simple for anyone with any tax situation to file their taxes for free. These are just a few of the tax situations you could have and use TurboTax Free to file your taxes with the CRA:
- Youre working for an employer and/or are self employed
- Youre a student looking to claim tuition, education, and textbook amounts
- You were unemployed for part or all of 2020, including if you claimed CERB
- Your tax situation was impacted by COVID-19, including if you had to work from home and want to claim related expenses
- You have dependants and want to ensure you claim all related credits and deductions
- Youre retired and receive a pension
- You have medical expenses to claim, including amounts related to COVID-19
- Its your first time filing your taxes in Canada
There are a few situations where youll need to print and mail your return instead of filing online using NETFILE. Dont worry though, you can still enter all your tax info online and well guide you through the process of mailing your return to the CRA.
Use Tax Preparation Software
Today, virtually all taxpayers who prepare their returns themselves use tax preparation software. Only about 10 percent of taxpayers prepare paper returns by hand using a pencil and calculator.
There is sophisticated tax preparation software specially designed for business owners available from several companies. The best known are Intuit TurboTax, H& R Block, and Tax Act.
There are versions of such software for sole proprietors. They include TaxAct Sole Proprietor, TurboTax Self-Employed, and H& R Block Self-Employed/Rental.
Using this software, you complete your return by answering a detailed questionnaire. All the necessary forms are automatically generated and checked for accuracy. Online support is also available if you have a question.
However, returns self-prepared with software are not necessarily correct. The maxim âgarbage in, garbage outâ always applies.
No doubt, the cost of business tax preparation software is much less than hiring a tax pro. And the expense is tax deductible.
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