Filing taxes can be intimidating, especially for freelancers and self-employed individuals. Recently, Ryan Scribner observed a practical demonstration of how to file taxes through Cash App. This process proved to be surprisingly straightforward and cost-free. The demonstration involved a freelancer who had set aside $5,000 for her tax obligations, hoping it would be sufficient to cover her liability.
Getting Started with Cash App Taxes
The process begins by accessing the taxes section within Cash App. To get there, users need to click the bottom left menu and scroll to the “explore” section, where they’ll find the taxes option. What makes Cash App particularly appealing for tax filing is that it’s completely free and can be done entirely from your smartphone.
Before starting the actual filing process, users need to:
- Create a separate password specifically for Cash App Taxes
- Gather all relevant tax documents beforehand
- Have their social security number ready
Filing Process Overview
The filing process follows a logical sequence, starting with basic information collection. Users need to specify their filing status, whether they have dependents, and identify their sources of income. The app walks users through various income categories, including:
- Employment income (W-2)
- Independent contractor work (1099-NEC)
- Investment income (1099-B)
- Interest income (1099-INT)
Handling Self-Employment Income
For self-employed individuals, the process requires entering information from 1099-NEC forms. The app guides users through entering business details, including:
The type of work performed, business name (if applicable), and income amounts. Users can also input business expenses and deductions, such as:
- Vehicle expenses for business use
- Home office deductions
- Health insurance costs
- Equipment depreciation
Investment Income Reporting
The app provides clear guidance for reporting investment income, including stocks, cryptocurrencies, and other investments. Users can enter both gains and losses, which can offset each other. Each sale can be recorded individually or summarized for cryptocurrency transactions, depending on the situation.
Remember to record both gains and losses from investments, as losses can offset your gains and potentially reduce your tax liability.
The process concludes with a review for errors and a summary of taxes due. During the filing process, users can switch between their phone and computer, making it convenient to access additional documents as needed.
While Cash App Taxes offers a user-friendly experience suitable for many tax situations, those with complex tax scenarios might still benefit from consulting a professional tax preparer. The key to successful tax filing is preparation – gathering all necessary documents beforehand and setting aside adequate funds for potential tax liability.
Frequently Asked Questions
Q: How much should freelancers set aside for taxes?
Freelancers should typically set aside 25-30% of their income for taxes. This amount may vary based on income level and state tax requirements. It is better to set aside more than needed rather than facing a shortfall.
Q: Can I file my taxes through Cash App if I have multiple income sources?
Yes, Cash App can handle multiple income sources, including W-2 employment, freelance work (1099-NEC), investments (1099-B), and interest income (1099-INT). The app guides you through entering each income source separately.
Q: What documents do I need before I start to file taxes?
You’ll need all income-related forms (W-2s, 1099s), investment statements, receipts for deductible expenses, social security numbers for you and your dependents, and any tax payments made during the year.
Q: Are Cash App Taxes really completely free?
Yes, Cash App Taxes is entirely free for both federal and state tax returns. There are no hidden fees or charges for additional forms or complex tax situations.
Q: Can I switch between my phone and computer while filing?
Yes, you can switch between devices anytime during the filing process. Your progress is saved, and you can access your return using your Cash App Taxes password on any device.
