Understanding the Tax Filing Process: A Beginner's Guide

We all have heard the quote "The definition of insanity is doing the same thing over and over and expecting a different result". Although no one knows if Albert Einstein actually said this or not, who are we to judge? I mean, we all have one recurring thing that we do on an annual basis, and every year, we expect the results to be different. Yet, every year, we stress, worry and fear hoping we are doing the right thing. Sounds insane to me.

Whether you're filing taxes for the first time or a seasoned veteran when it comes time to pay or collect from Uncle Sam, it can feel overwhelming, but with a little preparation and understanding, it doesn't have to be. Whether you're filing as an individual or a business owner, following these simple steps can help make the process smoother and less stressful.

1. Gather Your Documents

Start by collecting the necessary documents:

• W-2 Forms for income and taxes withheld from employers.

• 1099 Forms for investment, freelance or self-employed income.

• 1098 Forms for mortgage or student loan interest.

• Receipts for deductions like medical expenses or charitable contributions.

• Social Security numbers for you and your dependents.

2. Determine Your Filing Status

Your filing status affects your tax rate and deductions. Common options include:

• Single: Unmarried or legally separated.

• Married Filing Jointly: Both spouses file together.

• Head of Household: For unmarried individuals supporting a dependent.

• Qualifying Surviving Spouse (QSS): For those caring for a dependent after losing a spouse.

3. Understand Deductions and Credits

• Deductions lower your taxable income (e.g., mortgage interest, charitable donations).

• Tax Credits reduce the taxes you owe directly (e.g., Child Tax Credit, Earned Income Tax Credit, Foreign Tax Credit).

You can either take the standard deduction or itemize if your deductions exceed the standard deduction amount.

For 2024, the Standard Deductions are as follows:

• Married Filing Jointly: $29,200

• Single/Married Filing Separately: $14,600

• Head of Household: $21,900

• Qualifying Surviving Spouse: $29,200

4. Choose Your Filing Method

You have three main options:

• Professional Tax Preparation if you enjoy the peace of mind

• Self-Filing Online using tax software like TurboTax or H&R Block.

• Paper Filing by mailing forms to the IRS (less common and slower)

5. File Your Tax Return Once you’ve completed your return, file it electronically (e-file) or by mail. E-filing is faster and more secure, often resulting in quicker refunds.

6. Paying Taxes or Receiving a Refund If you owe taxes, pay them by the filing deadline (April 15). If you’re due a refund, the IRS will send it via check or direct deposit.

7. Tax Deadlines

The most common tax filing deadline is April 15, but it may be extended if that date falls on a weekend or holiday. You can request an extension up to October 15 for Form 1040, if needed, but remember, it only extends the filing time—not the time to pay any taxes owed.

8. Common Mistakes to Avoid

• Double-check your personal information (names, addresses, SSNs).

• Don’t forget to report all sources of income.

• Ensure you’re claiming the correct deductions and credits for your situation.

Conclusion

Filing your taxes doesn’t have to be complicated and stressful. By organizing your documents, choosing the right filing status, and understanding deductions and credits, you can simplify the process. Whether you file on your own or get professional help, staying informed will make tax season less stressful.

If you need assistance, with tax preparation or have questions on your current tax situation. Contact Boston Tax Advisors today to schedule a consultation and ensure your taxes are filed accurately and on time.