While tax filing is not such an easy task, you may be feeling overwhelmed with all the options on how to file your own taxes this year. Just remember, the more organized you are, the smoother the process will be. Here’s an easy guide to help you file your own taxes in 2023.
Do I Need to File Taxes This Year?
The question of whether you should file a tax return or not is a complex one and depends on several factors such as your income, tax filing status, age and other similar considerations. However, even if you’re not required to file, it could still be a smart move. You may be eligible for tax benefits, such as refundable credits like the earned income tax credit or the partially refundable child tax credit. It’s especially worth considering if:
- You had income tax withheld from your paychecks.
- You made estimated tax payments or had last year’s refund applied to this year’s estimated tax.
- You’re eligible for certain tax credits.
So, even if your income falls below the standard deduction threshold of $12,950 for single filers and $25,900 for joint filers, don’t shy away from filing. It could turn out to be a profitable decision as it could lower your tax bill or increase your refund.
All You Need to Know About 2023 Tax Season
The IRS started the 2023 tax season on January 23, 2023. Over 168 million individual returns are expected to file their taxes, with most filing before the April 18, 2023, deadline (which has been extended by 3 days from April 15). The IRS has taken measures to improve taxpayer service this season, hiring 5,000 new phone assistors and adding in-person staff.
Most states are adhering to the April 18 deadline. There are some exceptions:
States With No Income Taxes
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming do not have state taxes. Residents, however, still have to pay federal taxes depending on which bracket or category they fall under.
How is My Tax Calculated?
The government calculates your tax bill by dividing your taxable income into different levels called tax brackets. Each bracket has its own tax rate and you only pay that rate on the income in that bracket. This is called a progressive tax system and it means that the more you earn, the higher your tax rate will be. On the other hand, if you have a lower taxable income, your tax rate will be lower.
What Documents do I Need?
To file your taxes, you need to gather information like your filing status, income, tax paid and possible deductions and credits. This means you have to wait for forms like W-2s and 1099s, which you may have received by the end of January. The specific information you need depends on your job and personal situation. Here is a list:
- Names, dates of birth and Social Security numbers for yourself, your spouse and any dependents.
- Form W-2, which you receive from your employer (if you are an employee). It reports your income and the taxes already paid by your employer on your behalf.
- Form 1099-NEC (non-employee compensation), which you should receive if you earned more than $600 working for a non-employer entity, worked a contract job or had a side gig.
- Form 1099-MISC, which you would receive if you earned more than $600 in other income, including rents, prizes, fishing boat proceeds or crop insurance payments.
- Form 1099-INT, which you would receive from a bank or other financial institution if you earned more than $10 in interest during the tax year.
How do I Prepare to File my Taxes?
Tax preparation can be done in various ways, but the three primary methods are hiring a tax expert, using tax software and manually filling out forms.
DIY Your Taxes
You can do your federal taxes on your own by getting the forms from the IRS website and either printing and sending them in with a check if you owe money or filling them out online and paying with a credit card. There is no cost for doing your own taxes.
It can also help you understand your finances better by making you keep track of your money. Many people do their own taxes if their situation is simple, the same as last year, or they just want to learn more about it. It can be quick if you have all the forms you need.
Use a Tax Professional
If you have a complicated financial situation or are unsure about finances, it is best to hire a tax professional. These professionals can help you pay less and get more deductions. This can save you money in the long run.
Tax Preparation Software
If you’re looking for a middle ground between doing your taxes yourself and hiring a professional, tax preparation software may be the answer. You enter your own information, but the software guides you through the process step by step. Some programs like Line even offer professional support online or by phone. And if you use the software for multiple years, the top versions will automatically input your previous year’s information for you.
The Bottom Line
The sooner you gather all your info, the quicker you’ll be able to file and potentially receive your tax refund. Don’t be a victim of identity theft during the tax season rush – beat the crowd and file early. Whether you’re a DIY tax pro, prefer a tax wizard to help, or want to use software to simplify the process, now’s the time to get started!