You may have a few extra days to file your taxes this year (until Tuesday, April 17, to be exact), but you could save your sanity by cracking down on them now instead of waiting until the 11th hour.
Not sure how to start? Still have a ton of unanswered questions? We've got your back. Below, we help answer some of the most commonly searched-for tax queries from our site.
Should A Married Couple Ever File Separately?
If you tied the knot in 2017, congrats! A whole new world of tax filing now awaits you. Whether you should file jointly or separately depends on a lot of factors, and you may want to consult a tax professional before making a final decision.
Until then, the tax pros we consulted identified seven scenarios in which filing separately might be the way to go: When you have significant deductions; when you don't need to do a Roth conversion; if you're getting a divorce; if your spouse's tax refund will be taken by the government; when you earned a lot in capital gains and dividends; if you have a lot of unearned income; or you feel you need to protect yourself legally from any potential tax problems your spouse may face.
To read more about these scenarios, check out: Should a Married Couple Ever File Separately?
What's the Difference Between a 1099 and W-2?
The tax form you receive depends on how you're classified as a worker with the company you work for. An employee receives a W-2 and has payroll taxes automatically deducted from their paychecks, which are paid to the government through their employer. Independent contractors receive 1099s, and they're responsible for calculating their own payroll taxes and submitting them to the government on a quarterly basis.
But depending on the type of work you do, it is possible that your worker status could be misclassified. Learn more about that here: 1099 vs. W-2: How Independent Contractors and Employees Differ.
How Do I Do My Taxes If I Live and Work In 2 Different States?
Commute to Wall Street from Jersey City, or take the train from Baltimore into Washington, D.C., every morning? With those added complexities, we don't blame you for wanting to procrastinate filling out your tax forms. But there's good news: Some states have reciprocal agreements, which means you can work in a neighboring state without having to pay taxes there.
If your home and work states don't have such an agreement, you'll have to file a resident and a non-resident tax return. The bright side? You can claim a tax credit on your resident tax form for the taxes you paid in the state where you work.
To see which states have reciprocal agreements, check out: How to Do Taxes if You Live and Work in 2 Different States.
What Tax Exemptions Do I Qualify For?
Exemptions work similar to deductions in that they help lower the amount of income you'll be taxed on. For the 2017 tax year, you can deduct $4,050 from your gross income for each exemption. There are three types: personal exemptions (for yourself), spousal exemptions and dependent exemptions, which can include children, relatives and members of your household that you support.
But there are catches as to who qualifies and who doesn't. Learn more about that here: Tax Exemptions: Everything You Need to Know.
How Do I Calculate My Adjusted Gross Income?
Your AGI is your income minus specific things the government subtracts, like education expenses or IRA contributions, to finally arrive at the amount it will actually tax you on.
All of this math happens on your 1040, from lines 23 to 35, considered your "above the line" deductions. Many of these items require you to fill out a separate form to be filed along with your tax return. Some items include health savings account deductions, moving expenses, student loan interest deductions, and tuition and fees, for example. You'll tally all of those that apply to you in line 36 and take that sum away from your total income on line 22. Voilá! You have your AGI, ready to pencil into line 37.
Want to drill down further into the details? Read more here: How to Calculate Your Adjusted Gross Income.
How Do I File My Taxes If I Own a Home?
Whether you bought, sold or just lived in your home this year, there are plenty of tax breaks you can claim. This can depend on whether you paid interest on your mortgage, made energy-efficient improvements to your home, or took out a home-equity loan, among other factors.
Our primer can help you understand the nuts and bolts of it all. Get started here: Your Taxes: If You're a Homeowner.
How Do I File My Taxes If I'm a Freelancer?
You may enjoy the freedom of working in your pajamas and filing reports from your couch, but the world of self employment also comes with its own special world of tax prep. Even if you're a freelancing veteran who pays quarterly taxes and knows how to track every business income and expense, you may want to consider hiring a tax preparer to make sure everything goes smoothly.
Don't forget about the host of special forms to fill out, the deductions to look for and what mishaps could trigger an audit. Read more about that here: Your Taxes: If You're a Freelancer.
How Do I File My Taxes If I'm Paying Tuition?
Whether you're a student paying your own way through school, a parent paying for your kids' education, or a spouse paying for your partner's grad school, you can claim a number of education-related deductions and credits to help you lower your tax burden. For example, you can deduct up to $2,500 for the interest you paid on student loans last year. The American Opportunity credit also allows you to take up to $2,500 off your taxes if you're working toward a degree or other educational accreditation.
Find out more about these tax breaks by checking out this article: Your Taxes: If You're Paying Tuition.
What Happens If I File My Taxes Late?
We understand — timing can get the best of us! If you can't file your taxes by this year's deadline, don't panic. Every year, about 8% of taxpayers apply for a six-month extension.
The important thing to note here is that an extension to file is not an extension to pay. To get an extension, you'll still have to fill out as much of your 1040 as possible, then either e-file Form 4868 with your tax preparer; send in Form 4868 to the IRS by mail; or pay your estimated taxes online or by phone. No matter which method you choose, you must complete it by April 17.
If you don't file on time or complete the extension process, the IRS usually charges 5% of the taxes you owe each month your return is late, up to a max of 25%. After 60 days, the IRS will charge a penalty of at least $135 or the entire balance of taxes due on your return — whichever is smaller. You may qualify for an exception if you live outside the U.S. or are serving in a combat zone or a qualified hazardous duty area. If you do get an extension, you'll want to file your final paperwork by October 16, 2018.
Read more about the extension process here: What to Do If You Can't File Your Taxes On Time.
How Long Should I Keep Financial Documents?
Now that you're done filing (hooray!), you just might wonder what to do with all that paperwork hogging your desk space.
While you may not want to see another tax form for the next 11 months, don't trash anything just yet — you'll want to keep supporting documents for tax returns (think: W-2s, 1099s, tax-reporting statements, proof of charitable contributions, etc.) for at least seven years. Although the IRS has three years to audit you, that period can be longer if there's a chance you underreported income or it suspects fraud. That means for tax year 2017, you should keep your docs until 2024.
There are a few things you should keep indefinitely, too: tax returns with proof that you filed and paid if you owed money, and IRS forms you filed when you made nondeductible contributions to a Traditional IRA or Roth conversion.
Read More: How Long Should I Keep Financial Documents?
This publication is not intended as legal or tax advice. Taxpayers should seek advice based on their particular circumstances from an independent tax advisor.