When you file your taxes only once a year, it’s easy to forget everything that goes into the seemingly tricky process. And if your tax situation changed since you filed last year, there may be additional steps that now apply to you that once did not.
Whether you simply need a refresher or you’re filing your taxes for the first time, having a step-by-step guide at your fingertips is one of the best ways to ensure you cover all your bases. We put together just the guide you need to help you put another tax filing season behind you and avoid costly tax mistakes.
How to file taxes: 7 steps
You wouldn’t be wrong for feeling that taxes are often shrouded in mystery. As your tax situation becomes more complex, so can the filing process. Be that as it may, here are seven steps to follow when filing your taxes that should simplify the process for you.
1. Figure out if you need to file
The first step is to determine whether or not you need to file in the first place, as not everyone is required to file a federal income tax return each year. In most cases, if your income doesn’t meet a certain threshold for the year (this amount depends on your filing status, type of income, and age), then you don’t need to file a federal tax return. These thresholds, along with the tax brackets, are adjusted from year to year.
As long as your income is less than your standard deduction and you don’t have a type of income that requires you to file a return for other reasons, then you generally don’t need to file a return. It’s worth noting that you’re required to file if you are self-employed and had income of $400 or more or unemployment income.
For most taxpayers, you can determine if you need to file by checking the following chart:
|IF your filing status is:||AND at the end of 2020 you were:||THEN file a return if your gross income was at least:|
|Single||Younger than 65||$12,400|
|65 or older||$14,050|
|Married filing jointly||Younger than 65 (both spouses)||$24,800|
|65 or older (one spouse)||$26,100|
|65 or older (both spouses)||$27,400|
|Married filing separately||Any age||$5|
|Head of household||Younger than 65||$18,650|
|65 or older||$20,300|
|Qualifying widow(er)||Younger than 65||$24,800|
|65 or older||$26,100|
Filing no return — whether federal or state — is an uncommon scenario, but there are instances where you might not have to. For instance, if all the following are true, you don’t need to file a tax return:
- You are single
- You’re under the age of 65
- You don't have income earned from self-employment or unemployment
- You earned less than $12,400 (the 2020 standard deduction for a single taxpayer)
Even if you pay no federal individual income tax, which in 2018 accounted for 44% of people, according to the Tax Policy Center, you may still want to file a tax return. You may be eligible for certain refundable tax credits, like the Earned Income Tax Credit (EITC), and the only way to get the refund is if you file a tax return.
2. Decide how you’ll file your taxes
There are two ways to file your taxes: online and by mail. Whether you decide to prepare your own taxes or hire a tax preparer, these are the two ways to file.
E-filing is nothing new, but each year, more and more options are made available for people to file their taxes online, which is often a much simpler process than filing by mail. The online filing process often guides you through the steps according to the information you enter, which can help to take the guesswork out. If you decide to hire a tax preparer, they may have an opinion as to which method is preferred.
However you choose to file, try to decide ahead of time which route you’ll go so that you’re prepared for when it comes time to file.
3. Gather your financial documents
Having the appropriate forms close-at-hand will simplify the filing process, allowing you to pay your tax bill or receive your refund and move on. Although you may not receive all the necessary documents at the same time, it’s important to keep everything you need together and readily available.
Tax situations can vary drastically from person to person, but here is a checklist of common documents you might need before you file (this list is not extensive):
To document sources of income:
- W2 forms (used to report wages and taxes)
- 1099 forms (multiple forms, used to report various types of income)
- Form 1099-DIV (used to report dividends and other distributions you received)
- Form 1099-INT (used to report interest earned on interest-bearing accounts)
- Form 1099-G (used to report unemployment compensation, state or local income tax refunds)
- Form 1099-R (used to report withdrawals from retirement accounts)
- Form 1099-C (used to report canceled debt)
To handle the various types of deductions
- Form 5498 (IRA contribution information)
- Form 1098-T (used to report qualified education expenses)
- Form 1098-E (used to report student loan interest)
- Form 1095-A (health insurance marketplace statement)
- Schedule A (used when you choose to take itemized deductions, like medical and dental expenses, taxes, interest, gifts to charity, casualty and theft losses, and miscellaneous expenses)
To handle various tax credits:
- Schedule 8812 (Additional child tax credit)
- Form 2441 (Child and dependent care expenses)
- Schedule EIC (Earned income tax credit)
- Form 5695 (Residential energy credits, for green energy, like solar panel installation)
- Form 8880 (Saver’s credit for retirement plan contributions)
- Form 8863 (Education credits, including lifetime learning and american opportunity)
Depending on your tax situation, the documents you’ll need can range from a single W2 to multiple W2s, 1099s, various deduction forms, etc. Once you have all the documents needed to file, determine which tax form you’ll need to complete. You'll also want to have personal information on hand, like your Social Security number and possibly your bank account info if you think you'll be getting a tax refund.
4. Determine which forms you’ll need to file
In most cases, you’ll need a Form 1040 from the IRS. Form 1040, U.S. Individual Income Tax Return, is used to file an annual income tax return and is the redesigned version of the form after the IRS phased out Forms 1040EZ and 1040A at the beginning of the 2018 tax year. Form 1040-SR is available for those 65 and older.
When you have certain types of income or deductions, you may also be required to submit tax schedules along with your 1040.
The following three schedules accompany the new Form 1040:
- Schedule 1, Additional Income and Adjustments to Income: Used to report additional income not listed on 1040, such as capital gains, unemployment payments, and alimony. You’ll also report adjustments to income like educator expenses and health savings account deductions.
- Schedule 2, Additional Taxes: Provides lines for alternative minimum tax (AMT) and repayment of excess premium tax credit, as well as other taxes like self-employment tax and unreported social security.
- Schedule 3, Additional Credits and Payments: Used for reporting nonrefundable credits like education credits, retirement savings contribution credit, and residential energy credits.
5. Complete those tax forms
After you’ve gathered all your necessary documents and determined which form you’ll need, the next step is to start filling it out. At first glance, many tax forms can come across as complicated. If your financial situation is complex or you’re confused by the forms, now may be a good time to work with a tax pro to sort things out.
You can also use online tax software like Credit Karma or TurboTax to simplify the process. Credit Karma is free for all filers in all situations and most people should be able to use it to file their taxes. TurboTax, on the other hand, while a free version exists, it’s only available for filers with basic tax situations. So if you plan to itemize your deductions, you won’t be able to use TurboTax’s free version.
If you have specific questions about a prior year’s return or your 2020 return, you can also call the IRS at 800-829-1040 from 7:00 am to 7:00 pm local time.
6. File your taxes
Once you’ve completed all the necessary forms, it’s time to file. If you’ve chosen to file your taxes manually, ensure your return is postmarked by April 15, 2020, and send the documents via certified mail. Include a tracking option so you know that your return was delivered on time and to the right location.
If you’re doing your taxes online, filing is the last step in the process. You can choose to file online via a tax prep software or through the IRS Free File system. Filing online has many advantages over paper filing, including an acknowledgment that the IRS received your return. Plus, you’re more likely to receive your refund faster than if you were to mail it.
7. Get paid or pay the IRS
If you owe the IRS and file manually by mail, your payment (either check or money order) will need to be included when you submit your tax return. If you owe the IRS and file online, you can decide when the IRS withdraws the money, scheduling your tax payment in advance. This can be done up to the last day of the filing deadline, even if you filed your return earlier. You can also choose to pay by direct debit from your checking account or you can pay taxes with a credit card. Be aware that the IRS also provides payment plans if you find you owe more than you are currently able to pay.
If you’re due a tax refund, you can expect a check or the funds to be directly deposited into your checking account once it’s processed. Direct deposit is the fastest way to get your tax refund, with 9 out of 10 refunds being issued by the IRS in less than 21 days after processing a return.
FAQs about filing taxes
Is filing your taxes electronically safe?
Yes, it is generally considered safe to do an electronic filing of your taxes, as the IRS has various protocols in place to protect your data. If you are working with a professional tax preparer they should be able to explain their safety and security measures to you as well.
Can I file my taxes on my own?
Yes, you can fill your taxes on your own. If you qualify, you can use IRS Free File. Be aware though that this free tax filing service it doesn’t include your state returns. Most federal and state tax forms are fillable, and then you can print them out and send them in if you don’t file online.
You can also use tax software to help you figure and file your taxes. Many of them allow you to fill and print both federal and state tax forms and also give you the option to e-file. For more complicated taxes, or if you have specific needs, it can make sense to work with a tax professional who can walk you through more difficult issues.
At what income level do you file taxes?
Your requirement to file a tax return depends on your age, filing status, and income. In general, if you’re under age 65 and you earned less than $12,400 in 2020 as a single filer, you don’t need to file a tax return.
Do I need to file a Schedule 3?
Basically, a Schedule 3 is a list of credits you’re taking. If you are claiming certain credits, such as a foreign tax credit, child and dependent care expenses, retirement savings contributions, residential energy, sick and family leave, and certain other credits, you need to list them on Schedule 3. Many tax preparation software programs, like TurboTax, will automatically include this with your tax package when needed.
The bottom line on filing your taxes
Whether it’s your first time filing or you’re just looking for a refresher, taxes can feel pretty complicated and mysterious. Familiarizing yourself with the tax filing process ahead of time can ensure things go as smoothly as possible, and it will help you better understand how to manage your money.
While your tax situation may change from year to year, the tax filing process likely won’t change much, so keep this step-by-step guide earmarked for next year so you’ll know exactly how to file taxes when the time comes.