Tips On How To File Your Taxes

Feeling stressed about how to file your taxes? You’re not alone. A bankrate survey found that 69% of taxpayers who expect a tax refund have some anxiety about it—and tax-related anxiety spans across generations (Gen Z, millennials, Gen X, and baby boomers).

But, as the deadline approaches, don’t procrastinate or you may find yourself having to pay the penalties for filing taxes late.

Should you file your own taxes?

First, consider the following questions:

Is most of your income from a salary earned at an employer?
Do you have less than $12,950 in itemized deductions ($25,900 if you’re married and $19,400 if you’re the head of household)?

If the answer is yes to both of those questions, going the DIY route is fairly simple. Your employer will provide you with a W-2 form, which shows the tax that has already been withheld from your paycheck.

Uncle Sam already reduces your income through the standard deduction (the numbers shown in question #2).

Unless the sum of your itemized deductions (more on this later) is more than the amounts listed above, you’ll save time by skipping the extra paperwork and going with the standard deduction. Plus, you’ll face a lower audit risk.

How To File Your Own Taxes

There are a lot of online tools to help you file. Here are some free and low-cost tools that may suit your needs:

TurboTax Federal Free Edition (if you have a very simple tax return)
TaxAct Express: File from your phone.
IRS Free File: If you had an AGI of less than $73,000 in 2022.
TaxSlayer: If you have a more complicated situation (e.g., you’re self-employed, or you have income from stocks or a rental property).

When Should You Itemize Your Deductions?

If you answer yes to either of these questions, you might consider itemizing your deductions.

Do you own a home?
Do you have a high salary and live in a state with high income taxes?

As Lisa Greene-Lewis, a CPA and tax expert with tax-preparation software provider TurboTax told USA Today, “Generally, if you own a home, you should itemize because mortgage interest and local property taxes are both deductible on your federal return.”

For some, the sum of mortgage interest paid and real estate property taxes is greater than the standard deduction, making itemizing deductions a better deal

Another itemized deduction is the amount you pay in state and local taxes. If you have a high salary and live in a state with high taxes (we’re talking to you, Californians), you can deduct your state taxes from your federal filing.

However, note that since 2018, the deduction for real estate taxes paid, as well as for state and local tax paid, is limited to $10,000 per return. This means that fewer people will itemize deductions than if the $10,000 limit did not exist. This is also known as the SALT cap.

If these questions apply to you, do some quick mental math to see if the sum of your mortgage interest plus $10,000 exceeds the standard deduction threshold. If so, it’s time to whip out those receipts to make sure you get your full refund for any and all qualified tax write-offs.

What Can You Deduct?

In general, expenses related to the following are deductible:

Health insurance premiums
Interest on student loans (up to a $2,500 limit)
Charitable contributions
Medical expenses (as an itemized deduction)
IRA contributions (subject to income limits)
Property taxes (subject to a $10,000 cap)
Mortgage interest (as an itemized deduction)
Child care (up to specified amount based on income)

How To Hire Someone To Do Your Taxes

If you’re self-employed, plan to itemize, or have complicated questions, you may want to let someone else handle your taxes. But before you hand over your financial information, make sure to do a bit of research. Typically, you should search for a qualified Certified Public Accountant (“CPA”) or an Enrolled Agent (“EA”) to prepare your tax return, and ideally receive the person’s name by way of referral..

Here are some questions to consider asking:

Can you confirm your Preparer Tax Identification Number (PTIN)?
Do you have any tax-specific training and related credentials, like a CPA or EA?
What types of tax returns do you typically handle?
How do you determine how much to charge?
How do you handle audits?
Will you be signing my return as my preparer?

What Documents Do You Need?

Last year’s tax returns: e.g., Form 1040 and related schedules
Wage statements: W-2 and 1099-NEC or 1099-MISC forms
Interest and dividend income: 1099-INT and 1099-DIV form(s)
Additional income: K-1, Social Security, unemployment, etc.
Any other financial document that provides clarity to your situation

The Bottom Line

For many, filing taxes involves a few clicks on a smartphone. For others, this might not be the case. Filing taxes can be burdensome if your situation is complicated, so don’t feel any shame in asking for help. There are many qualified professionals that can help with your particular situation.