Where to File?
FreeTaxUSA is my preferred tax software. It's a division of TaxHawk and offers free federal filing, with a charge of $15 per state. Based on my personal experience, their software was able to accommodate:
- Standard W-2 income, from multiple states.
- Investment income, specifically in 1099-B, 1099-DIV, and 1099-I.
- Capital gain and losses, including cryptocurrency.
- Roth IRA mischaracterizations.
- Filing multiple state returns, with Illinois and New York.
- Split refund between direct deposit and treasury bonds.
Big non-referral link with more information
Questions I ran into
Can I be claimed a dependent on someone else's return? Yes, and this is the case for most college students. This in turn makes me ineligible for many tax credits.
Where do I live as a college student? The state I return home to, which is Illinois in my case. Guidance from both New York and Illinois suggest that despite having a domicile in New York, I am a permanent resident of Illinois for filing purposes.
More on FreeFile
The IRS offers FreeFile as a way for payers below a certain income threshold (usually $40,000 - $73,000 as the max) to file federal taxes at no cost. TurboTax was a program particpant until the 2021 tax season.
All publicized offers can be found at https://apps.irs.gov/app/freeFile/browse-all-offers/ but it seems like other providers may offer the service without being included on this portal.
Reducing Pain Points
Headaches from filing come from one of two areas:
- Uncertainty regarding your financial situation (when asked questions by software or an accountant).
- Not having all your information together when it's time to file.
The former can be solved to an extent with personal finance tools like Mint or Maybe, which not only track spending trends but also provide a timeline of your financial activity. My focus recently has been on the latter, and taking time after filing to prepare a bit for next year with increased organization.
For example, if I know that a company has requested my SSN because they might need to send me a 1099 next February, I will note that down now so when it's time to get my information together there is a nicely organized list of places who have placed a tax burden on me. Also important to note is that corrections to a 1099 do happen, and appears to have a correlation with how that particular company approaches compliance in general. While the generally accepted time for having 1099's out is mid-Feburary, waiting until mid or late March allows you to avoid amending a return because something was corrected after the fact.
Photo by Kelly Sikkema on Unsplash
W2 - "Wage and Tax Statement" provided by employer to employee, and is the default method many employers use for reporting annual income and taxes. A copy is typically sent to the IRS, and a copy to the employee in late January.
1099 - Category for many different types of miscellaneous income, but commonly for investment or other payments greater than $600 in a calendar year.