Illustrated by Cristi Cash
Last Updated January 04, 2024
5 min read

Completing a Return

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Filing your tax return can be daunting, but understanding the process and taking it step by step can make it more manageable. This article guides you through the essential steps to ensure a smooth and accurate filing experience.

Ways to E-file

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 Your 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.

Choosing the Right Filing 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.

Click here to read how this tool works, and for disclaimers.

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, while credits reduce the amount of tax you owe. Some common deductions include mortgage interest, state and local taxes, and charitable contributions. On the other hand, common credits include the Earned Income Tax Credit, the Child Tax Credit, and education-related credits.

When you use e-filing software to file your taxes, you are asked about the many deductions and credits you may be eligible for. Most won't apply to you, but those that do can save you significant money. Take your time and review each category before moving on.

Deduction vs Credits

When it comes to taxes, deductions and credits can help reduce the amount of income that is taxed and the amount of taxes owed. 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.

On the other hand, 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.

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
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.

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