How to File Taxes in 5 Steps in 2024

Business InsiderJanuary 1, 2024

  • You can prepare and file your own taxes online for free if your adjusted gross income is $79,000 or less.
  • Paying a professional to do your taxes is an option if your financial circumstances are complicated.
  • You should file a return even if you can’t afford to pay the tax you owe to avoid additional penalties.

No matter how many times you do it, filing a federal tax return can cause a lot of stress. And that stress can be intensified the longer you wait to do it.

If that’s the case for you, take a deep breath, collect your thoughts, and follow these 5 steps to work your way through the process:

Step 1: Gather the documents and information you need

Depending on how complicated your financial situation is, you might have very few or an overwhelming number of documents to compile. Many will arrive in the mail, including those from your employer or banks where you have interest-bearing accounts, in envelopes clearly marked as tax-related. Others you might have to seek out on your own.

“Be sure to visit all of the websites for your various investment accounts since many providers no longer send paper tax documents,” says Kimberly Dula, a certified public accountant in Philadelphia.

Among the most common information and documents you’ll need to file your taxes are:

  • Personal information like your Social Security number and bank account information to pay any balance due or to deposit any refund
  • If you are an employee, Form W-2, which details your income and tax withholdings, among other items
  • If you’re self-employed, Form 1099-NEC, which details your self-employment income  
  • Additional 1099 forms, which detail interest, dividends, royalties, pensions, Social Security, and other types of payments not received from your employer
  • The letters sent out from the IRS showing how much you received in stimulus and advanced child tax credit payments
  • Receipts and other records detailing the amounts paid on deductible items such as mortgage interest, charitable donations, and certain medical expenses

Step 2: Decide how you are going to prepare your taxes

There are three main routes you can take to prepare your return:

A. Tax-preparation websites or packaged software

Tax-prep websites and packaged software have become increasingly popular. 

See Personal Finance Insider’s picks for the best tax software >>

Well-known brands include TurboTax, H&R Block, and TaxAct. Services range from basic to comprehensive, with costs that start at zero and rise accordingly.

After you’ve picked one, gather your documents and enter all your information. Depending on your circumstances, you can do so in under an hour. This is a good option for more straightforward situations or for people who wish to DIY their tax returns and not pay a professional, says Riley Adams, a certified public accountant and senior financial analyst at Google.

IRS Free File

The Free File program is a partnership between the IRS and tax preparation companies that provide their products for free. There are two ways to utilize it:

Traditional IRS Free File provides free online tax preparation and filing options on IRS partner sites to taxpayers whose adjusted gross income is $79,000 or less.

Free File Fillable Forms are electronic federal tax forms you can fill out and file online for free. This option requires that you know how to prepare your tax return and is also available for taxpayers whose income is greater than $79,000.

B. Hiring a tax preparer

Hiring a tax preparer tends to be the most expensive option, but it could pay off if they also can help with tax planning. This can be an enrolled agent (EA), certified public accountant (CPA), or other professional.

While this is the most hands-off method, you still need to take time to review your returns to assure everything has been accurately included. H&R Block, for example, offers a tax pro starting at $89. You can meet in an office or via chat, phone, or video, pass along your documents, and they’ll do the rest.

There are also many small, private accounting firms and individuals out there ready to help. The typical firm charges an average fee of $323 for a 1040 itemized and $220 for a 1040 not itemized, according to the National Society of Accountants.

C. The old-fashioned way — by hand

Although most people these days file their taxes electronically, it isn’t required. You can still follow the IRS instructions, fill out the paper forms, and mail them in.

When would it make sense to do that? If you’re not really good at math, probably never.

“I would never recommend that someone complete and file their return in paper form,” Dula says. “There is too much risk that an error will be made in the various calculations that go into the return.”

Step 3. Figure out which credits and deductions you can take

Deductions reduce the amount of your taxable income. You can individually itemize deductions or use the standard deduction

Standard deductions for the 2023 tax year — claimed by the vast majority of taxpayers — are $27,700 for married couples, $13,850 for single filers and married individuals who file separately, and $20,800 for those who file as a head of a household.

Certain taxpayers can’t use the standard deduction, like a married individual filing separately whose spouse itemizes deductions.

The most common itemized deductions include:

  • Interest paid on a mortgage
  • Charitable donations
  • Medical expenses
  • Property taxes
  • State income taxes

If the total of your itemized deductions amounts to less than the standard deduction, take the standard deduction. If the total exceeds the standard deduction (and doesn’t get capped by other tax rules), then itemize. In addition to itemized deductions, you can deduct expenses directly related to your business or rental property.

You may also be able to claim tax credits such as the child and dependent care credit, the child tax credit or the foreign tax credit.  Credits reduce your tax liability dollar for dollar so they are more valuable than deductions.


 

 


 

Step 4. Put it all together and see if you owe tax or are due a refund

If you’re using a website or tax-preparation software, it will take you through the process step-by-step, asking a wide range of questions about everything from your income to your marital status and dependents that it uses to find deductions and credits applicable to your situation. Some also offer live tax advisors online for an additional fee.

If you’ve chosen to hire a professional, they will return to your completed return to you for review before filing. If you’ve prepared your own returns on paper, double and triple-check the math and make sure you haven’t missed  any deductions or credits.

Once you’ve finished, be it on your own or through a professional, you’ll discover whether you owe the IRS money or if you overpaid and are due a refund.

 Step 5. File your tax return 

The last step to filing your tax return is to, well, actually file the tax return.

According to the IRS, the vast majority of individual tax returns are filed electronically. That’s also the quickest way to get a refund if you’re due one. If you e-file, you’ll usually get your refund within a few weeks.

If you do go the hard-copy route, be sure to attach any additional forms and supporting documents required. Don’t forget to sign and date your return. And be sure to have the envelope postmarked by the April 18 filing deadline.

If you owe money

If you’re unable to pay the tax you owe by your original filing due date, the balance is subject to interest and a monthly late payment penalty. There’s also a penalty for failure to file a tax return. So file on time, even if you can’t cover your balance in full, to avoid having to pay that.

The IRS accepts payment electronically, by phone or from a mobile device (check out the IRS2Go app) through IRS Direct Pay. 

If you decide to pay by mail, send a check or money order payable to “United States Treasury” with your payment voucher.  Be sure to include the Social Security number for the first taxpayer listed on the return as well as the tax year and form in the memo section. If you can’t pay in full, you should pay as much as possible to reduce the accrual of interest. You can also apply for an installment plan through the IRS website and have your payments debited directly from your bank account, withheld through a payroll deduction, or paid by credit card.

If you’re due a refund

If you’ve filed electronically and provided your bank account information, the IRS will send the refund directly to your account. You may also request a physical check be mailed instead. But that could take much longer. And there’s always the possibility it could get lost in the mail. If it’s been a while and you haven’t received anything, you can also contact the IRS about your refund.

How to file taxes FAQs

How much do you have to earn to file taxes?

If your annual income is less than the standard deduction for your filing status, you generally won’t owe tax and don’t necessarily have to file a tax return. However, you might want to file a return anyway because you could be due a refund even if you didn’t pay any tax.

Is it hard to file your own taxes?

Even with tax software to assist you, doing your own taxes takes time and patience. If you have a simple return, the task should not be very difficult. You might want to consider hiring a pro to file your tax return for you if you have multiple sources of income or significant assets.

What are the options for filing my taxes?

You have two basic options for filing taxes: Doing it yourself with tax software or through the IRS website; and hiring a tax preparer to do it for you. The DIY route will help you save money. But if you have a complicated return or are uncomfortable with the process, you may be better off paying for a pro to do it for you.

 


 

Our experts answer readers’ tax questions and write unbiased product reviews (here’s how we assess tax products). In some cases, we receive a commission from our partners; however, our opinions are our own.

This article was written by Cpa, Sheneya Wilson and Christiana Sciaudone from Business Insider and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.