Filing your taxes can seem daunting at first.
I mean, why is your employer sending you all these forms in the mail? What’s a W-2? A 1099? What receipts should you keep? What deadlines are approaching?
Moreover, are you going to get money from the IRS? Or are you going to owe money come April 18th?
On the surface, it’s all pretty confusing. But once you see the bigger picture — the whole A to Z process and how it works — it all starts to make way more sense.
So let’s do that now!
Here’s how to file your taxes, step-by-step.
1. Understand taxes and how they work
Even if we determine in Step 2 that you don’t need to file taxes this year, it’s important for you to understand what they are and how they work.
Not only because you’ll almost certainly be paying taxes eventually, but because understanding our tax system is fundamental to our functioning democracy.
I mean that quite literally. The whole reason the U.S. broke off with Britain is because enough citizens understood our current tax system and that it was total B.S.!
On a more fundamental level, understanding taxes will also help to ensure you file them properly moving forward. Because the Internal Revenue Service (aka IRS, the agency responsible for collecting taxes in this country) ain’t messing around.
Remember: they’re the ones who caught Al Capone when no other federal agency could. More recently, they’ve somehow managed to outsmart tax dodgers who hid their gains in crypto.
Point being, everyone should understand how taxes work.
And thankfully, they’re pretty simple.
How taxes work, in a nutshell
Taxes are basically your “subscription fee” to America. In order to use the roads, public schools, Medicare, the fire department, and other civil services, you gotta pay taxes.
Taxes also help pay for other government-funded initiatives, such as space exploration, tech and medical research, and our military.
Now, not everyone pays the same “subscription fee.” The U.S. uses a “progressive” system where you pay certain percentages for different chunks of your income.
It’s easier to explain once I share the tax rates for 2022 (the year you’ll file for in 2023):
| Tax rate | For single filers | For married individuals filing joint returns |
|---|---|---|
| 10% | <$10,275 | $20,550 |
| 12% | $10,275 – $41,775 | $20,550 – $83,550 |
| 22% | $41,775 – $89,075 | $83,550 – $178,150 |
| 24% | $89,075 – $170,050 | $178,150 – $340,100 |
| 32% | $170,050 – $215,950 | $340,100 – $431,900 |
| 35% | $215,950 – $539,900 | $431,900 – $647,850 |
| 37% | $539,900+ | $647,850+ |
Now, let’s say you’re single and made $50,000 in 2022.
- Your first $10,275 will be taxed at 10%
- All the money you made between $10,275 and $41,775 (aka $31,500) will be taxed at 12%
- All the money you made between $41,775 and $50,000 (aka $8,225) will be taxed at 22%
It’s a common misunderstanding that as soon as you make more than $89,075, all of your income will be taxed at 24%. Thankfully for anyone who got a raise last year, that’s not how it works. If you made $89,076, exactly $1 of your income would be taxed at a rate of 24%.
Now, in addition to federal income taxes, you may also have to pay state income taxes. Only nine states don’t charge state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
As for folks in the other 41, some states have a flat rate (Colorado = 4.55%) while others have a progressive rate (Georgia = between 1% and 5.75%). Filing your state income taxes is usually much easier than federal, and the professional and DIY solutions we’ll discuss below will help you take care of it.
But for the purposes of the rest of this article, we’ll focus on federal taxes since that’s 90% of the work!
2. Determine if you even need to file taxes for 2022
Broadly speaking, if you made more than $12,950 in net income last year, you probably need to file your taxes. Even if you didn’t, you might still benefit from filing a tax return, anyways.
Oh, and “filing a return” is just another way of saying filing your taxes. For clarity on more tax-related lingo, jump down to our tax term glossary below.
You may not need to file a tax return if you’re:
- Under the age of 65
- Single
- Earned less than $12,950 in 2022
- Don’t have any other special circumstance or sources of income that would require you to still file (e.g., unemployment income, self-employment income, etc.)
If you meet all of those, you don’t have to file a tax return.
But you might want to, nonetheless.
Why you might still want to file a tax return (even if you don’t have to)
The IRS lists a few bonafide reasons why it’s still worth your time to file a return, even when you’re not required to. Here are the big three:
- You might still get a refund — if your employer withheld some of your paychecks for taxes and you ended up making less than $12,950, you’re actually entitled to get some or all of that money back. The same goes for if you qualified for the earned income tax credit, child tax credit, etc.
- It helps you apply for financial aid — If Uncle Sam already has an accurate picture of your income (or lack thereof) from your tax returns, it’ll make it easier and faster to approve you for aid in the future.
- You’ll earn more Social Security later — Underreporting your self-employed income can not only get you in trouble but can shrink how much you make from Social Security later, since the IRS bases that amount on how much you pay in Social Security taxes during your income-earning years.
Speaking from personal experience, it’s also just good practice. You get familiar with the forms, what goes where, and all that other jazz while everything’s way simpler and the stakes are much lower.
Now that we’ve (hopefully) determined that you’re filing either way, how much time do you have?
3. Know your deadlines
Your next step is to mark your calendars for some key dates. You’ll certainly want to have all your ducks in a row well before April 18, 2023, when your taxes for 2022 are due!
TurboTax has a super helpful list of every possible deadline between now and tax day 2023, but here are the big hitters that will most likely apply to you:
- January 23 — Tax season officially began, meaning this was the first day the IRS would accept your 2022 tax returns.
- January 31 — Due date for employers to send out W-2 and 1099 forms. Your W-2 is essentially your record of employment at a salaried job that includes how much you earned last year. It looks like this, and you’ll need it to file your taxes. A 1099 looks just like a W-2, only it’s for independent contractors, not salaried employees. Now, January 31 is just the deadline to send these forms. If you haven’t received your W-2 or 1099s by Valentine’s Day, you might want to reach out to your employer/client.
- April 18 — This is the day your tax return is due and is the closest thing we have to an anti-holiday in this country (save, perhaps, Columbus Day?). To be honest, I’m not sure why people dread tax day. I mean, most people get an average refund of ,200, which is a helluva lot more than you get on your birthday. But I digress. You gotta get your filing done by midnight on April 18. And the consequences for missing the deadline range from none at all to pretty sticky.
What happens if I miss the deadline on my taxes?
For starters, if you know you’re going to miss tax day, you can file for an extension before April 18. If approved, the IRS will extend your deadline to October 16 and charge a nominal interest rate on your taxes owed but no penalties.
But don’t file for an extension unless you really need it.
If you straight up miss tax day, the IRS will charge you a fee of 5% of the taxes you owe each month until you pay up. If you’re self-employed and owe, for example, $15,000 in taxes, 5% ($750) can rack up quickly.
Now, if you fail to file by April 18 and the IRS owes you money (which is typically the case with W-2 employees), they won’t care as much. You’ll only get hit by a Failure to File fee, which maxes out at the lesser of $435 or 100% of your total taxes paid that year.
In other words, if the IRS owes you money and you don’t come get it, they basically go:
¯_(ツ)_/¯
Each year, Americans leave over ” billion in unclaimed refunds on the table with the IRS. And it’s not really the IRS’s fault for “withholding” it, since they can’t send your money without your tax return.
