As the tax deadline approaches, it’s time to tackle that ever-important task: filing your tax return. Whether you’re a seasoned pro or a first-time filer, getting started early can help alleviate stress and ensure you meet the deadline. In this blog post, brought to you by our financial literacy partner, Banzai, we’ll cover the basics of completing your tax return, from gathering necessary documents to navigating common deductions and credits. So, grab your paperwork and let’s dive into the world of tax filing!
If you want some more in-depth help, Banzai offers a Tax Return Coaching Session. It takes about 10 minutes and provides more details than are available in this post. Click here to check it out.
E-Filing: When you have the need for speed
Filing taxes involves tracking and recording numerous numbers, names, and IDs. While it is possible to do all the math on paper and mail it in using the tax forms provided by the IRS, e-filing is a faster and more accurate option. You can e-file your taxes from any computer with internet access, and the IRS website IRS.gov provides information on the different e-filing options available. If your adjusted gross income is $75,000 or less, you may be eligible to use the Free File software provided by the IRS to e-file your taxes.
Gross Income is all taxable income you have in one year, including earned income, investment income, and certain other forms of income.
Adjusted Gross Income is the total gross income minus adjustments such as contributions to IRAs, half of any self-employment tax paid, qualified moving expenses, and alimony paid.
On their website, you answer a series of questions, and Free File generates a properly filled-out tax form, including information on whether you owe taxes or will receive a refund. The best part is that you won’t be charged for the federal return and may also be able to file your state tax return.
If you prefer to do everything yourself, you can use Free File’s digital forms by visiting this site, but you must do all the work yourself.
Commercial e-filing software operates similarly to the Free File guided tax preparation. These programs may offer more advanced filing options, such as assistance with audits and state filing, but they come at a cost, usually ranging from $100 to $200.
You can hire a licensed professional to e-file if you have complex taxes. They will let you know what documents they need, fill out your tax return, and ensure everything is evident when they send it to the IRS. However, they can be expensive. The most basic tax return typically costs around $220 and rises from there.
Gathering the right documents
After selecting your preferred e-filing process, you are prompted to provide personal information such as Social Security numbers, details of dependents, income documentation such as W-2 and 1099 forms, and receipts or documentation for deductions and credits. Depending on your situation, you may require additional information or documents such as rental income, self-employment income, and Social Security benefits. If you need the necessary documents or are unsure about any answer, you can save your progress and resume when you are ready.
What's your status?
Understanding your filing status is a crucial aspect of taxes. Whether you are single, married, filing jointly, head of household, or a qualifying widow(er) can significantly affect your tax liability. If you are unsure about which status to choose, the IRS provides a helpful tool called the “filing status tool” here to assist you in determining the appropriate filing status.
Deductions and Credits
When calculating your taxes, several factors come into play. These include your income, deductions, credits, and tax bracket.
- Your income is the most significant factor as it determines your tax bracket.
- Deductions reduce the amount of your taxable income. For example, if you earned $50,000 last year and did not have any deductions, you would owe $5,700 in income tax. However, if you apply the standard deduction of $12,500, you would only be taxed on $47,500 and owe $4,700 instead. The $12,500 standard deduction reduced your owed taxes by $1,000.
- Some common deductions include mortgage interest, state and local taxes, and charitable contributions.
- Credits reduce the amount of tax you owe. Tax credits are applied directly to the taxes you owe. For instance, if you owe $4,700 in taxes, a $2,000 child tax credit reduces your taxes to $2,700.
- Common credits include the Earned Income Tax Credit, the Child Tax Credit, and education-related credits.
Once you have entered all your taxes, deductions, and credits, you receive a digital copy of the file. Double-check that everything is accurate and fix any errors you find before filing. It is much easier to correct mistakes before submitting your taxes than after. Also, save a copy of the file securely for future reference. When you’re ready to file, you must authorize the software you use to send your taxes. This process is relatively easy, but you must check a few boxes and provide an electronic signature. Depending on your information, the process can take a few minutes to a few hours.
After you file
After filing your taxes, it’s essential to stay updated on the status of your submission. The IRS typically confirms receipt of your digital submission within minutes, but the processing time can vary greatly depending on the time of year, from a few days to several months to fully process.
Once the IRS accepts your file, they will refund what they owe you or bill you what you owe them. You can receive the refund as a paper check mailed to you or have it directly deposited into your bank account. It is your responsibility to pay any taxes owed promptly. If you owe taxes, the IRS will send you a bill through the mail. Please note that the IRS will never call you on the telephone.
Remember that the IRS can audit any of your yearly files and request verification of the information you filed. Although audits are rare, they can still happen. You should file your taxes accurately and keep all the necessary documentation. If you cannot prove that your information is correct, the IRS may charge you additional taxes and penalties. For minor errors, the process is usually straightforward, but if the IRS suspects intentional fraud, the consequences could be more severe, including imprisonment.
Remember to take your time, gather all necessary documents, and consider seeking professional assistance. With careful attention to detail, you’ll ensure an accurate and timely tax filing.
Disclaimer from Banzai:
While we hope you find this content useful, it is only intended to serve as a starting point. Your next step is to speak with a qualified, licensed professional who can provide advice tailored to your individual circumstances. Nothing in this article, nor in any associated resources, should be construed as financial or legal advice. Furthermore, while we have made good faith efforts to ensure that the information presented was correct as of the date the content was prepared, we are unable to guarantee that it remains accurate today.
Neither Banzai nor its sponsoring partners make any warranties or representations as to the accuracy, applicability, completeness, or suitability for any particular purpose of the information contained herein. Banzai and its sponsoring partners expressly disclaim any liability arising from the use or misuse of these materials and, by visiting this site, you agree to release Banzai and its sponsoring partners from any such liability. Do not rely upon the information provided in this content when making decisions regarding financial or legal matters without first consulting with a qualified, licensed professional.
