The thought of filing can lead to nightmares of numbers and paperwork.
But with some knowledge and planning, you’ll find that the process isn’t as hard as you might fear.
From the forms you need to the deductions you can make, we’re here to make your tax filing process as easy as possible.
When are taxes due this year?
The deadline to file your 2023 taxes is Monday, April 18, 2024.
Need more time? To request a 6-month extension on your taxes, you’ll need to file Form 4868. Be sure to pay what you estimate you will owe in taxes to avoid penalties and interest. Your completed taxes will have a new due date of Oct. 15, 2024.
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First-time tax filers
Filing your taxes for the first time can be a little intimidating. But really, there’s nothing to be afraid of. And with the possibility of getting some money back at the end of the process, you’ve got even more reason to get it done.
There are three levels of taxes that you may be responsible to pay: federal, state, and municipal (local). You’re responsible for filing these taxes each year.
Unless your income falls below a certain level, everyone needs to file federal income tax. State taxes are applicable in 43 states, and many municipalities require you to pay annual taxes as well.
Here’s all you need to know to get your taxes filed correctly and on time.
Factors that affect how much you pay in taxes
The money you pay in taxes goes to funding government programs and services, like the U.S. military, law enforcement, education, health care, and Social Security. How much you’ll pay in income tax depends on many factors.
- Taxable income: The more money you make, the higher the tax bracket you’ll be in. That means that you’ll have to pay a higher overall percentage of your earnings to taxes.
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Filing status: Your marital status affects how much you pay in taxes. When filing taxes you have to state if you’re single, married and filing jointly, married and filing separately, widowed with a dependent child, or ‘head of the household.’ The last example is for when you’re unmarried but have at least one dependent and pay more than 50% of the household expenses.
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Age: Depending on your age, you might be entitled to special tax breaks. If you’re 19 or younger, you may be able to report your earnings on your parent’s return. Similarly if you’re a full time student under 24.
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Other factors: The amount you pay in taxes can be affected by things like if someone else is claiming you as a dependent, if you’re able to claim any deductions like medical expenses, and any credits you might be entitled to.
Information and documents needed to file
When you file your taxes, you need to ensure you have all the documents required on hand. These documents give the government everything they need to figure out how much you owe or will get back from your taxes.
- Your Social Security number: One of the most important pieces of identification that you have. Your SSN is used to track your financial information.
- W-2 form(s): Your W-2 is your annual wage and tax statement. Your employer has to provide this to you by Jan. 31.
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1099 form(s): These are forms that show money you earned from a source other than an employer — such as freelance work or interest earned on a savings account.
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Tax forms from any retirement accounts: The amount you’ve contributed to your retirement accounts are eligible for tax deductions, so be sure to keep record of this.
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List of educational or classroom expenses and any unreimbursed medical bills: Things like school tuition and fees are eligible for tax credits. So are some medical expenses if they weren’t reimbursed and total more than 7.5% of your adjusted gross income.
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Amount paid toward property taxes and mortgage interest: If you itemize your deductions, you can deduct some of these taxes.
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Charitable contributions: Not only is giving to charity a nice gesture, but it also gives you a deduction on your taxes. Be sure to keep receipts and be prepared to itemize your contributions to get the credit.
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Amount paid in state and local taxes: Income, sales, and property tax is deductible up to a combined limit of $10,000 (or $5,000 if you’re married and you and your spouse file separate returns).
One of the most important forms you’ll need to file your taxes is Form 1040. This is the main form you use to declare your income, deductions, and credits. It’s also the form that will tell you how much money you owe - or hopefully get back.
There are a few other forms you might have to fill out when filing your tax return:
Schedule A: If you choose to itemize your deductions, you’ll need to fill this out. Take time to weigh the options of itemizing them yourself or taking the standard deduction.
The IRS provides a helpful tool that can help determine what your standard deduction would be.
Schedule B: This is required if you have taxable interest or dividends above $1,500.
Schedule C: Fill this out if you have profits, losses, and expenses from a freelance job or as a sole proprietor.
Schedule D: Use this if you have gains and losses from investing in stocks, bonds, and more.
Form 1098: If you want to deduct mortgage interest payments above $600, you’ll need to complete this. Your lender can provide this for you.
How to file your taxes
If you’re not sure how to actually file your taxes, luckily there’s quite a few options available to you.
If this is your first time filing taxes, you might not want to tackle all the paperwork yourself. You don’t want to risk making any mistakes on your return - mistakes that could cost you money.
No matter what approach you take, you want to start your tax return early. The IRS charges a 0.5% late payment penalty every month if you miss the deadline, but there are other reasons to start early.
Rather than face the last minute stress of trying to assemble all of your paperwork, starting early lets you ensure you have everything ready to enter into the forms or hand off to a tax specialist.
Do it yourself
If you’re interested in taking a DIY approach to your taxes, it’s an opportunity to get a close-up view on your finances. This can help you out if you’re trying to better understand your budget or want to come up with a financial plan.
All the forms and instructions you might need are available online, so there’s no need to wait until tax season to start getting things in order.
Using the IRS
The IRS also offers free fillable forms online that allow you to easily enter the info you need.
If you have any questions along your journey of self-filing, be sure to consult the IRS Interactive Tax Assistant (ITA). There, you’ll be able to get answers to most of your tax-related questions.
Tax specialists
Using a tax specialist or tax accountant will cost you more than your other options, but the expense can be worth it.
If you have a particularly complicated tax return — for instance, if you worked both for an employer and as a freelancer — a tax specialist can help maximize your deductions.
Hiring a tax professional can save you time and can help you avoid being audited by the IRS. The money that you spend on hiring a tax professional also counts as a business write off, so if you’re self-employed or are incorporated, hiring one makes a lot of sense.
Tax software
If you want a more guided approach to completing your tax return, using tax software is a great option.
Tax software simplifies filing your federal and state tax returns, and ensures you take advantage of any money-saving opportunities available.
Tax software is also generally less-expensive than going to a tax-professional. If your taxes are straightforward, you might even be able to get them completed online for free.
Get help filing your federal and state tax returns, and ensure you take advantage of money-saving tax opportunities available with these tax software options.
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Tax brackets
The amount of money you make determines what tax bracket you fall in. The more money you make, the more taxes you pay.
Taking advantage of deductions and tax credits helps to lower your taxable income, and can definitely be worth it if you’re on the border of a higher tax bracket.
For 2023, here’s how the tax brackets will work:
- If you file as a single and had a low adjusted gross income of $10,000 last year, your tax rate is 10%
- If you file as a single and had adjusted gross income of $85,000 in 2023, you pay:
- 10% tax on the first $11,000
- 12% tax on the next amount, up to $44,725
- 22% tax on the final portion, up to $85,000
If you and your spouse file your 2023 taxes jointly and had adjusted gross income of $600,000 last year, you pay:
- 10% tax on the first $22,000
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12% tax on the next slice, up to $89,450
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22% on the portion going up to $190,750
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24% tax on the next section, up to $364,200
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32% tax on the portion after that, going up to $462,500
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35% tax on the final chunk, up to $600,000
As you earn more money, you'll want to take steps to reduce your taxable income and drop down into a lower top tax bracket. Directing some of your earnings into an individual retirement account (IRA) or 401(k) retirement savings can help accomplish that.
2022 income tax brackets
Still need to file for last year? For the 2022 tax year, here is a breakdown of the tax brackets.
For individual taxpayers
For couples filing jointly
Test your tax knowledge
What is the average IRS tax refund amount given for the 2023 tax season?
Tax credits vs. deductions
Paying taxes isn’t fun, but paying less in taxes makes it a little better.
Knowing how to use tax deductions and tax credits can save you money - but first you have to know what deductions and credits are.
Tax credits are used to reduce the amount of tax you pay or give you a greater refund. Even if you don’t owe taxes, some credits will still give you a refund. You can still claim tax credits even if you choose to take the standard deduction.
Deductions are used to reduce your total amount of taxable income. Deductions are made to your income to help reduce the amount of taxes you owe. When it comes to deductions, you have two main choices, the standard deduction, or itemized deductions.
Standard deduction vs. itemized deductions
- A standard deduction is a prescribed amount based on the standard deduction set by the federal government plus deduction amounts for your age and other factors. It’s estimated that 90% of Americans choose to use the standard deduction
- You are required to list all the items you wish to claim as a deduction on your taxes. This process involves keeping original copies of receipts that you will submit along with your tax return. If you itemize, you might be able to claim things like property tax, real estate tax, and charitable contributions.
Commonly used tax breaks
When it comes to using tax deductions and credits, you may be wondering where to begin.
Here are some of the most common tax breaks and deductions you can use to your benefit:
- Medical and dental expenses: Once you’ve hit more than 7.5% of your adjusted gross income in medical expenses, you can deduct certain unreimbursed expenses
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Student loan interest: You can deduct up to $2,500 of the interest you pay your loan annually
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Charitable donations: You can write off up to $300 in cash donations ($600 for married couples who file jointly) to qualifying charities
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Child-care expenses: With the Child and Dependent Care Expenses credit, you might be able to claim some of the cost of putting your child in daycare
Remember, to take advantage of certain deductions, you’ll have to itemize your deductions instead of taking advantage of the standard option.
More: 9 overlooked tax breaks and deductions
Income taxes
When you work, some of the money you make goes to the government. The money that’s taken off is called income tax.
Income tax is used to fund things like social security, federal and state government, the military, and health care.
The amount you pay in income tax depends on the amount of money you make. The more income you receive, the higher the tax bracket you’ll fall in.
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James Battiston has been writing personal finance articles for various websites for the past four years. He has a background in film and TV production, and can often be found consuming far too much coffee.
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