Learn About Filing Your Tax Return

Understanding the Basics of Filing Your Tax Return

A tax return is a form you submit to the Internal Revenue Service (IRS) that reports your income, deductions, and credits for the year. Filing a tax return is a requirement for most people who earn income in the United States. The tax year runs from January 1 through December 31, and you typically file your return between January and April 15 of the following year.

According to the IRS, roughly 150 million individual tax returns are filed each year in the United States. Your tax return serves several purposes: it tells the government how much income you earned, it determines how much tax you owe or how much of a refund you might receive, and it creates an official record of your income for the year.

You'll file a federal tax return with the IRS, and depending on where you live and how much you earned, you may also need to file a state tax return. The most common form for individual federal income tax is the Form 1040, though the IRS offers simplified versions for certain situations.

Your employer may have withheld taxes from your paychecks throughout the year. When you file your return, you're essentially settling up with the government. If too much was withheld, you'll receive a refund. If too little was withheld, you'll owe money. The average federal income tax refund in 2023 was approximately $3,000 according to IRS data.

Practical Takeaway: Filing your tax return is a required annual task. Understand that the process involves reporting your income, claiming deductions and credits you may have earned, and either paying taxes owed or receiving a refund. Most people have between January 1 and April 15 to complete and file their return.

Determining Whether You Need to File a Tax Return

Not everyone is required to file a federal income tax return. The IRS sets income thresholds that determine filing requirements. These thresholds vary based on your age, filing status, type of income, and whether you're a dependent. For 2024, if you're a single person under age 65, you generally must file if your gross income is $14,600 or more. This threshold increases if you're age 65 or older, and it's different for married couples, heads of household, and other filing statuses.

Even if you don't meet the income threshold and aren't required to file, you might want to file anyway. If your employer withheld income taxes from your paychecks, filing a return could result in a refund of that money. Additionally, if you had self-employment income of $400 or more, you're generally required to file to pay self-employment taxes, regardless of your total income.

Certain types of income always require you to file, even if the amount is small. These include:

• Self-employment income of $400 or more
• Income from a job where taxes weren't withheld
• Earned Income Tax Credit (EITC) or Additional Child Tax Credit that you want to claim
• Net profit from a business or farm
• Income from rental properties or investments

If you're a dependent—such as a teenager living with parents—the income threshold for filing may be lower. For example, in 2024, if you're a dependent and have unearned income (like interest or dividends) of more than $1,250, you may need to file.

Practical Takeaway: Check the IRS income thresholds based on your age and filing status. Even if you're not required to file, consider filing if taxes were withheld from your paychecks—you may receive a refund. Self-employed individuals earning $400 or more must file regardless of other income.

Gathering Documents and Information You'll Need

Before you begin filling out your tax return, collect all necessary documents and information. Having everything organized will make the filing process smoother and help you avoid mistakes. The specific documents you need depend on your situation, but most people need at least a few key items.

Your most important document is your Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN). You'll need this, along with your spouse's if filing jointly. You'll also need to verify your filing status and gather information about dependents, including their SSNs and birth dates.

Documents to gather include:

• W-2 forms from employers: These show your wages and withheld taxes. Employers must send these by January 31. If you worked for multiple employers, you'll have multiple W-2s.
• 1099 forms for other income: Forms like 1099-INT (interest income), 1099-DIV (dividend income), and 1099-NEC or 1099-MISC (self-employment or contract work) report non-wage income.
• Mortgage interest statement (Form 1098): If you own a home and paid mortgage interest, your lender sends this form.
• Education statements (Form 1098-T): If you paid higher education costs, this form documents qualified expenses.
• Student loan interest statement: If you paid student loan interest, request this from your loan servicer.
• Charitable contribution records: Keep receipts or written acknowledgments from charities if you itemize deductions.
• Medical and dental expense records: Documentation of out-of-pocket health costs if you itemize.
• Property tax statements: For state and local property taxes you paid.
• Prior year tax return: Having last year's return helps you reference previous information and compare changes.

You should also gather information about any major life changes during the year, such as marriage, divorce, birth of a child, or purchase of a home. These events may affect your tax situation.

Practical Takeaway: Create a folder—physical or digital—and collect all income documents (W-2s and 1099s) by February. Gather supporting documents for deductions you plan to claim. Having organized records before you start prevents delays and reduces the chance of missing deductible items.

Understanding Deductions and Tax Credits

Deductions and tax credits are both ways to reduce the amount of tax you owe, but they work differently. Understanding the difference and knowing which ones you may be able to claim can significantly affect your tax liability.

A deduction reduces your taxable income—the amount of income the government taxes. For example, if you earn $60,000 and claim $10,000 in deductions, you only pay taxes on $50,000. Tax credits, on the other hand, directly reduce the amount of tax you owe. A $1,000 tax credit reduces your tax bill by exactly $1,000, making credits generally more valuable than deductions of the same amount.

You have two choices regarding deductions: you can take the standard deduction, or you can itemize deductions. The standard deduction is a fixed amount set by the IRS that reduces your taxable income. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. Most taxpayers use the standard deduction because it's simpler and often results in a bigger deduction than itemizing.

If you itemize, you list specific deductions on your return. Common itemized deductions include:

• Mortgage interest paid on your primary home
• State and local taxes (property taxes, income taxes, or sales taxes)
• Charitable contributions
• Medical and dental expenses that exceed a certain percentage of your income
• Student loan interest (up to $2,500)

Common tax credits that may lower your tax bill include the Earned Income Tax Credit (EITC), Child Tax Credit, education credits like the American Opportunity Tax Credit, and the Child and Dependent Care Credit. In 2023, the Child Tax Credit provided