Steps to Filing Your Taxes

tax infographic from getwalnut.com

Here is information you need to prepare for your taxes:

1. Gather your tax forms

   You will need certain financial information to finish your income tax return. Gather the subsequent documents before you file your return. If you’re expecting a document and haven’t gotten it by mid-February, reach out to your employer. Here are the different types of common tax forms:

   • W-2 forms: Your employers use this type of form to report what proportion you earned and how much tax it already withheld. If you've got multiple employers who withheld tax, you'll get a W-2 from each of them. Companies must mail all W-2s by January 31, so you should have yours by early February.

   • 1099 forms: 1099 reports money that you earned outside of what employers report on a W-2. Dozens of versions support this sort of income. Some common forms have income from interest (1099-INT), dividends (1099-DIV), Social Security benefits (SSA-1099), distributions from pensions or IRAs (1099-R), and other income like from self-employment (1099-MISC). most 1099s must be within the mail by January 31, so you should have yours by early February. (Learn more about 1099 forms.)

   • 1098 forms: Interest payments and expenses you'll deduct, like mortgage interest and tuition expenses

2. Gather other necessary documents

   Other necessary documents that you will need to finish your income tax return include:

   • Any documents, forms, or receipts with other income you made during the year. This might include income, income from an installment sale, or lottery winnings.

   • Documents for any taxes you've already paid, including income tax payments, property taxes.

   • Last year’s income tax return, but more specifically your adjusted gross income (AGI). The IRS uses your AGI from last year’s return to verify your identity.

   • Your checking account number and bank routing number to direct deposit any refund you'll receive. 

   • If you have any dependents, confirm you have their dates of birth and Social Security numbers (SSNs) or Individual Taxpayer Identification Numbers (ITINs). Also, gather any documents detailing support payment or alimony payments.

3. Decide your type of tax deduction

   You can either take a standard or itemized deduction when you file your tax. Tax deduction and tax credits help lower your taxable income, which means you will have a smaller tax bill. So it’s important to collect all your receipts to file for your deduction and tax credits. Common receipts include:

   • Education costs

   • Charitable giving

   • Medical expenses

   We will go more in-depth about tax deduction and tax credits in the next reading.

4. Decide where to file your tax return

   To file your income tax return, you would like to finish Form 1040. It’s the essential federal tax form and basically, the sole taxpayers who don’t use it are nonresident aliens.

   The general 1040 instructions are simple: you add up all of the income you earned, you claim deductions and credits, then you calculate what proportion tax you have paid to see whether or not you paid enough. You have to attach other forms or schedules to say deductions and credits, also to provide proof of your financial situation. For instance, you need to attach all W-2s to your 1040.

   There are three main ways to file your tax return:

   1. E-file (the safest and easiest option)

   2. Mail a paper return

   3. Work with a tax preparer 

   File electronically:

   The easiest and safest way to complete your income tax return is to file electronically, or e-file. There are a variety of online products that guide you through filling out your 1040 and attaching the required documents. you'll then submit your return electronically.

   The IRS strongly recommends e-filing. It’s easier to process than paper returns, you get refunds faster, and it’s safer because forms can’t stray within the mail. The IRS also offers a Free File program for people with income less than $69,000. You can still use Free File if you've got a higher income, but you can’t use the Free File software, so you'll get less guidance. You’ll also have to file your state return yourself if your state has a tax. Some states do have their own online filing services for a small fee. 

   You may also qualify for free of charge help preparing your income tax return through the IRS’ Volunteer tax Assistance (VITA) program. It's generally available to taxpayers who make $56,000 or less, have disabilities, or don’t speak English well. 

   Other online tax-filing services may charge a fee for his or her services, especially if your tax situation is more complex. Common services are TurboTax, H&R Block, TaxAct, TaxSlayer, FreeTaxUSA, and Credit Karma. 

   Some services, like TurboTax and H&R Block, even have software that you simply can purchase and download to your own computer rather than filing online.

   Mailing a paper return:

   Mailing a paper form is discouraged by the IRS if you can e-file because it’s less secure and takes longer to process. You'll need to wait months before you get a refund versus a couple of weeks if you file electronically. The IRS has also found that 21% of paper returns have errors on them, compared to but 1% of electronic returns. However, you'll find all necessary tax forms on the IRS website and complete a paper return if you would like to. Filing by paper is free.

   Work with a tax preparer:

   A tax accountant or other certified tax preparer can assist you in person. This is often most helpful if you've got a difficult/complex tax situation or if your taxes have changed drastically from one year to subsequent. A web service can handle the bulk of people’s taxes, but tax preparers/CPAs can handle more difficult situations.

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Continue to the next reading to understand what your tax deduction and tax credits are. As well as understand why the term “tax audit” is not as scary as everyone makes it sound.

Disclaimer: This article is written for the 2020-2021 tax year

Edited by Vanessa Wong

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Guest Author Spotlight: Joyce Lam

Joyce is a Tax Site Supervisor for VITA program at IRS. She is also a founder of Kaimore, a nonprofit that promotes economic mobility by providing targeted professional development services for those who are underprivileged.