How to File Taxes for the 2023 Tax Year

by Creating Change Mag
How to file taxes - tax software


Wondering how to file taxes effectively? If so, you’re probably wondering the best way to tackle the process. Just like the saying goes, “The longest journey starts with a single step.” So, let’s take the first step with this essential guide for how to file taxes for the 2023 tax year.

The First Step: Gather Filing Information from the Previous Year

Whether you’re going to file your own taxes 0r use tax preparation services, your first step before you prepare and file a tax return is to make life easier and gather all the pertinent filing information from the past year. That may include:

  • A W2 form
  • A 1099, or multiple 1099s, and documentation of expenses. A basic thing to know as a side business taxes guide is that you’ll get a 1099 from all who paid you $600 or more during the year.
  • For self-employed people (who run a business and don’t receive 1099s), you’ll need documents about your revenue and expenses.

When Can You Start Filing Taxes for the Year?

It’s already tax season. You could have already started if you were filing online. You can start your tax preparation required by the IRS by filling in all the pertinent information. If you’ve moved or your filing status has changed, it’s a time-saving first step to get that info entered and out of the way.

Do you anticipate a refund? The quicker you file, the sooner that refund will arrive.

Decide How to File Your Federal Income Tax Return

Filing IRS federal taxes can be simple or complicated. You may be able to file for free online. Which type is your tax return?

That’s the first step in the decision process. If you only have a w2, for example, you should be able to prepare and file taxes on your own.

Even if you have more than one job and multiple W2s, federal and state taxes were already deducted. Local taxes may also have been deducted, or you may have to file them separately. You’ll use the standard deduction in 2024, which is $14,600 if your filing status is single. You can file taxes using IRS free file. Or you can use basic tax preparation software to electronically prepare your federal income tax return.

If you are self-employed and wondering how to file self-employment taxes, tax filing gets a bit more complicated. You can still file taxes on your own, but you’ll appreciate the guidance of either a professional preparer or the best tax software as you prepare your federal return.

Here are a few tips from ClearValue Tax about how to safely and easily maximize your tax refund:

The Best Options for Filing Tax Returns

Solo? Software? Tax preparer? Free file? Here is more detailed information about the best options for filing tax returns:

Tax Software

Tax preparation software can help you simplify filing your federal tax return. As a bonus, all the information you need for the feds can be used to file your state and local tax returns.

As you use tax return software to do your own tax return, you’ll be prompted to add information that may garner tax breaks. You may find tax deductions that you didn’t know you had (see below).

Hire a Tax Preparer

Hiring a tax professional is a great option, especially if you’re just getting started with your own taxes (a new business venture). A tax professional offers guided tax preparation and may have suggestions for steps you can take in the coming years to help you save money.

IRS Forms Online

All the forms you’ll need for federal tax filing are available via the IRS; you’ll need separate forms to file state and local taxes. You can download and print the forms – using them as worksheets before you use IRS free file, using them as IRS fillable forms.

Free File

You can file an IRS-free file federal tax return. Well, the IRS free file option part is free – of course, you may still need to pay what you owe on your tax return! You can pay what you owe using a credit card, linking to your bank account or setting up a payment plan (if you can’t immediately pay all you owe.) You can receive a refund by linking to your bank account.

Here’s a table that lists the best options for filing your tax returns, along with their pros and cons.

Option Description Pros Cons
Solo Filing taxes on your own without assistance. – Complete control over your filing process. – May miss out on potential tax breaks or deductions.
Tax Software Utilizing tax preparation software to file federal taxes, with potential options for state and local taxes. – Streamlined process with prompts for tax breaks. – Some software may have associated costs.
Tax Preparer Hiring a tax professional for guided tax preparation and potential future money-saving suggestions. – Expert guidance and assistance. – Can be more expensive compared to other options.
IRS Forms Online Accessing all necessary federal tax forms directly from the IRS for manual filling or as worksheets. – Free option for those comfortable with manual filling. – Requires more effort and calculations compared to software.
Free File Using the IRS free file option for filing federal taxes; may need to pay owed taxes or set up payment plans. – Free option for federal tax filing. – Additional costs if you owe taxes or opt for refund options that involve linked accounts.

Each option has its advantages and disadvantages, so choosing the best approach depends on your comfort level with tax filing, the complexity of your tax situation, and budget considerations. Consider the features and benefits of each option to find the one that suits your needs and ensures a smooth and accurate tax filing experience.

How to file taxes - pic of the word tax on top of coins

Determine What Tax Bracket You Fall Into

There are 7 tax brackets that determine your tax rate. The tax rate ranges from 10% to 37%.

Your taxable income is calculated using the total of your earned and investment income and then adjusting that figure based on deductions. Read more about deductions below.

Get Your Tax Documents Together

Trust us – get all your tax documents together before you start. You may very well already have everything you need, for example, your QuickBooks or similar software. Or you may have all your documents in a less official location, such as the Big Drawer. Either way, let’s get started:

Tax Deductions

The total amount of your tax deductions will determine whether you itemize on your income tax return or use the standard deduction. The standard deduction varies by filing status, and you’ll have to total up your deductions to see which way you qualify.

Let’s take a look at the following possible tax deductions you may be eligible for:

  • State and Local Income Taxes: The money you’ve paid on your state and local income tax burden can be deducted from your federal income tax return.
  • Real Estate and Personal Property Taxes: The money you’ve paid for these taxes can also be deducted as you file your federal taxes.
  • Home Mortgage Interest: Depending on your mortgage rate, the amount of interest you pay may be significant.
  • Gifts to Charity: Charitable donations can also be deducted. You’ll need receipts, plus documentation that proves the entity that receives your gift is a charitable organization.
  • Medical and Dental Expenses: This includes the cost of premiums you’ve paid. If you’re on the Healthcare.gov insurance (and receive a discounted policy), this doesn’t include the total premium amount for the policy, but it does include the portion of the premium that you pay. Other medical and dental expenses may be covered, but only if the cost exceeds 7.5% of your Adjusted Gross Income.
  • Student Loan Interest: The amount of interest you’ve paid on a student loan may also be deducted, even if you’re no longer a full-time student.

how to file taxes - a 1040X form

How to Pay Your Taxes

Now that you know how to file taxes online, you can also ensure that your taxes are paid on time. The best way to do that is to pay as you file – you’ll be hit with interest charges for past-due amounts on your account.

Bank Account

When you file a tax return, you can pay from a checking or savings account.

Card

You can pay with a personal or business credit card.

Payment Plan

Taxpayers can set up scheduled payments. You can set up the process for free online, using the IRS free file website.

How to file taxes - irs

Tax Filing Extensions for the 2024 Tax Filing Season

If you need more time, it’s free to file for an extension. You must file by the date taxes are due. Only minimal information is needed to file for an extension. You’ll make estimates and use IRS form 4868, which is free to download and use.

How to File an Amended Tax Return

Taxpayers can make mistakes when they file taxes. You may have left out a deduction, for example. Or if you’re self-employed, you may get a 1099 late and want to add that to your return.

You’ll need to file an Amended Tax Return using IRS form 1040X.

How to File Back Taxes

If you find yourself in a situation where you owe back taxes, it’s essential to take the appropriate steps to address the issue. If you don’t, you can be looking at lots of accrued interest or even penalties.

The best course of action is to work directly with the IRS to resolve the outstanding tax debt. To begin the process, you’ll need to set up an account using irs.gov, which allows you to access the necessary tools and resources for managing your back taxes.

Setting up an account with the IRS is a straightforward process, typically done online through their official website. Once you have your account established, you can explore the available payment options to determine the best plan for your financial situation. The IRS offers various payment plans, allowing you to spread out the payments over a period that suits your budget.

Image: Envato Elements






The post originally appeared on following source : Source link

Related Posts

Leave a Comment