Whether you’re a newbie or have done it before - here’s a set by step guide to file your taxes in the US in 2023.
Tax season is just around the corner, and if you haven't already started thinking about your federal tax return, now's the time to get started. The U.S. federal income tax code is a complicated system that requires you to file a return every year that you make money. If you're dreading the thought of filing your taxes because it seems too complicated or too much work, don't worry — we're here to help.
- When and why should you file your taxes
- How does the government determine your taxes?
- Filing your taxes: by yourself or get help and how?
- Documents you need for filing your taxes
- Determine if you owe the IRS or do you stand to get a refund
Let’s break it down in 6 parts for you and answer all your questions:
1. Do I even need to file my taxes?
This depends on a lot of factors - some heavier than the others. Your income, your income tax filing status, your age and a whole host of other factors such as number of dependents on your income, or if you’re registered as an NGO in the US. It also depends on whether someone else can claim you as an income tax dependent and so on.
But here’s our take: None of the above should stop you from filing a federal tax return. Here’s why: Well, you could qualify for a tax break that could generate a refund (that you may not even be aware of). If your income falls in a bracket that doesn’t qualify for income tax payment, you may actually want to look at refundable credit which is also called the Earned Income Tax Credit (EITC). If you are a parent of a child below the age of 17 you might also be able to snag the partially refundable Child Tax Credit (CTC).
Irrespective of the your income bracket, you may want to consider filing for taxes for at least one of the below reasons:
- 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 income tax.
- You qualify for certain tax credits.
2. When do I need to file my taxes?
The IRS typically begins to accept income tax returns in late January. The purpose of the 2023 tax-filing season is to file taxes for the 2022 financial year.
Even if you hire someone else to help you out with federal tax return filing, it is always a good idea to learn and understand how your taxes are calculated and how it affects your financial well-being. And this brings us to the next question.
3. How are my taxes determined?
Your taxable income is taxed at different rates depending on how much you earn. You won’t be taxed at the top rate on your entire income, but rather only on the income in a particular bracket.
The government divides your taxable income into chunks, or brackets, and taxes each chunk at a corresponding tax rate. Because you don't pay tax on the same amount of your total income in each bracket, the beauty of this system is that you never end up paying more than your fair share.
The United States progressive income tax system means that people with higher taxable incomes pay more and those with lower taxable incomes pay less. It’s that straightforward!
4. How do I file my taxes?
So, there are three main ways to file taxes:
- Fill out IRS Form 1040 or Form 1040-SR by hand and mail it (not recommended)
- File taxes online using tax software
- Hire a human tax preparer to do the work of tax filing
The first two options are available only if you can't use IRS Free File or e-file. If they're not an option for you, consider hiring a professional tax preparer from our list of top picks for best tax preparation services.
If you've used tax software in the past, you're familiar with how to prepare and file taxes online. Many major tax software providers offer access to human preparers, too.
For example, TurboTax, H&R Block, TaxAct and TaxSlayer all offer software packages or support options that come built-in with a host of features including on-demand, on-screen or online tax pros who can answer your questions, review your return and file taxes online for you.
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The Internal Revenue Service provides free online tax preparation software through its Free File program. To qualify for the program, your adjusted gross income must be below a certain threshold—$73,000 or less in 2018. We'll update this article when the new income limit is announced.
An alternative to filing your taxes yourself is to hire someone to prepare them for you. You can find a tax preparer who will do it in person, over the phone or via email. It’snow become so easy to file your taxes that you can do it without even leaving your home. Yes, that’s right. A secure portal lets you share documents electronically with a tax preparer. Typically, the preparer will email you a link to the portal, you'll set up a password and then you can upload pictures or PDFs of your tax documents.
Here’s where you can find local tax preparers around you:
5. What will I have to be ready with when I file my taxes?
Gathering the right documents and evidence you need to file your return can be like going on a treasure hunt. You’ll need to do this whether you’re hiring a tax preparer, doing your own taxes, or both. The goal is to gather proof of income, expenses that might be deductible or earn you a credit, and evidence of taxes paid throughout the year.
Here’s a quick round up of everything you’ll need to be ready with:
- Social Security numbers for yourself, as well as for your spouse and dependents, if any.
- W-2 form, which tells how much you earned in the past year and how much you already paid in taxes. (If you had more than one job, you might have more than one W-2.)
- 1099 forms, which are a record that some entity or person — not your employer — gave or paid you money.
- Retirement account contributions.
- Property taxes and mortgage interest.
- Charitable donations.
- State and local taxes you paid.
- Educational expenses.
- Unreimbursed medical bills.
- Last year’s federal and state tax returns.
6. What’s the final outcome after I file my taxes?
Well, the final outcome will be either of these two: either you will end up owing the IRS in which case you need to pay and settle your taxes or you will be eligible for a refund that you can claim and receive in due time.
If after filing, you are to owe the IRS,
- The IRS offers several payment options, including paying by check or money order, credit card, debit card and even cash.
- Tax time can be a little bit stressful. So if you can’t pay your taxes in one shot, maybe an IRS payment plan is the way to go. With this option, you make monthly payments directly to the agency to settle what you owe. There are two kinds of payment plans: short-term and long-term. Either way, there’s no interest added on to the bill so you don’t need to worry about that expense.
If after filing, you are to collect a refund,
- We suggest that filing taxes on paper is not the most popular way to file. The IRS typically takes six to eight weeks to process paper returns, but given the agency's ongoing backlog, you could be looking at a longer timeframe.
- When you file taxes online, your return should be processed within a few weeks. State tax filing authorities also accept electronic tax returns—which means you may be able to get your state refund check faster, too!
- You can have the IRS deposit your refund directly into your bank account instead of sending a paper check. That way you won't have to wait for a check in the mail.
- A refund is like a vacation. It’s exciting to think about, and you can check on the status of your refund online on the IRS’s website.
Filing federal taxes in the US especially as an expat may seem daunting, but with the right help you’re well on your way to nail it!
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