Long gone are the days of just a W-2 and filling out a simple 1040EZ. Today’s tax situations are usually a little more complicated – especially for those working side gigs and investing that hard earned cash.
But just because your tax situation is a little more complicated doesn’t mean you can’t still file your taxes yourself. In fact, if you know what to look out for, filing your own taxes can help you map out a plan for reducing the taxes you owe next year and keep your on top of your personal finances.
Before you file here are some things you should be aware of, and how H&R Block can help.
What Your Side Hustle Means for Your Taxes
Having a side hustle is great. A good side hustle can help you reach your financial goals faster and could even lead to a full-time career down the road.
The problem this can present with taxes is that most side hustles are done on an independent contractor basis and if you’re a new side hustler, this can be an unexpected shock!
If you’ve only ever been an employee (and receiving a W-2 at the beginning of each year), then receiving your first 1099-MISC as an independent contractor may throw you for a loop. As an independent contractor, taxes are not withheld from your pay and you are responsible for paying those taxes yourself when you file your taxes.
There is an upside to receiving 1099s though. For starters, you’re able to deduct more of your business expenses than you would be able to as an employee. For instance, if you had to buy office equipment or pay for work/business related expenses or, these may qualify as tax-deductible expenses.
Receiving 1099s and claiming deductions isn’t extremely hard to do but might be confusing, especially if it’s your first year dealing with this type of situation.
Some common situations where this might arise is driving for Uber or Lyft, being a Postmate, selling items on Amazon, and more.
This could be confusing, but using online tax software like H&R Block can make filing simple. It will walk you through all of the necessary forms and ask you simple questions to make sure you don’t miss anything.
More Investment Options Can Equal More Investment Tax Forms
There are a ton of great ways to invest and nowadays many of them come with very small minimums. For example, maybe you’ve taken advantage of Robinhood and $0 commissions, or Stash or Acorns, where you can get started investing for just $5. These mobile investing options are great, but if you’re new to investing, you can’t forget about taxes!
If you’ve taken advantage of the low barriers to entry and have money spread over many different types of investments, you can expect to get many different tax forms.
Some common tax forms to be on the lookout for are:
- 1099 – INT (Reports interest paid to investor.)
- 1099 – DIV (Shows total amount of dividends paid to investor.)
- 1099 – B (Shows capital gain or loss for the year.)
Once again, even if this is your first time filing taxes, it’s not hard to file with easy to follow directions. H&R Block will walk you through each of these events, and help make sure you account for everything.
Let’s Not Forget About Student Loans
Last but not least, we can’t forget about student loans.
While student loans can be a huge burden, they can actually “help” you during income tax time. If you paid interest on your student loans last year, you may be able to take a deduction of up to $2,500 or the amount of interest you paid – whichever is the lesser amount.
The amount of deduction you qualify for will be based upon your modified adjusted gross income. You can receive full deduction on your 2016 tax return if you’re filing single and earn $65,000 or less, or if you’re married and file jointly with your spouse and your combined income is $135,000 or less. Once you reach those levels your deductible student loan interest begins to be phased-out.
A tax deduction is great because it will lower your taxable income – which saves you on taxes! Don’t worry, your online tax software can help you figure this out – no math is needed on your part.
But You Can Still File Taxes Yourself
Does having a more complicated tax situation scare you? It doesn’t have to! Just because you’re receiving more tax forms doesn’t mean that you need to be intimidated or that you can’t still file taxes yourself. In fact, depending on the complexity of your situation, you might even be able to do your taxes for free.
This year H&R Block rolled out More Zero which allows filers to file both federal and state 1040EZ, 1040A, and 1040 with Schedule A, completely free. This is great for those who itemize deductions, homeowners and those with medical and childcare expenses.
H&R Block also has a Deluxe edition which is great for getting the most deductions and a Premium edition which is ideal for small business owners and investors. We like H&R Block for its ease of use and helpful resource center and think that it’s a great online tax product for any situation.
Ready to give it a try? Get started with H&R Block for free.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.