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Here's What You Need to Do Your Taxes

Last updated Jan 29, 2024

Tax season is upon us, but there’s no reason to stress! Although taxes can seem daunting, they’re pretty easy when you have what you need.

The sooner you get your taxes done, the sooner you can either enjoy your refund or tackle what you owe, depending on your situation. Here's what you need to file your taxes quickly.

1. A Method for Filing 

You can choose one of two preferred filing methods: doing it yourself with a tax software or paying an accountant to do it for you. Each method has benefits and drawbacks.

Filing With a Tax Software

If you’re confident in your bookkeeping skills, you may be able to save money by filing with a tax software. In fact, some say you could cut your filing costs by 50% or more1! And if you’re particularly adept and prepared, you can be done in under an hour.

Filing With an Accountant

If you’re uncertain about your accounting skills (or just too busy to file by yourself), a personal accountant may be the best route. Experts particularly recommend hiring one if you’re in a complicated tax situation, such as owning a business/being self-employed, undergoing a life change (i.e. marriage, a job change, receiving an inheritance) that influences your taxable income, or owing money from previous tax years. An accountant may also help you find exemptions and credits you didn’t know about2, which can decrease your tax liability and/or increase your refund. 

Here are some of the qualities an ideal personal accountant should possess3.

  • They come highly recommended by friends, family members, and/or colleagues.
  • They don’t promise unrealistic results, such as an astronomical refund.
  • They willingly offer information that verifies their legitimacy, such as a Preparer Tax Identification Number (PTIN.)

2. Identifying Documents and Tax-Specific Forms

Whether you do your taxes with an accountant or on your own, you’ll need several documents to file them accurately. What you’ll need depends on your employment situation and any tax credits or deductions you wish to claim. 

You will almost certainly need the following4.

  • Social Security information: You’ll need your Social Security number, as well as the numbers of your spouse and any dependents you have. 
  • W2(s): If you have a job and you’re not self-employed, you should have received a W2 from your employer at the beginning of the year. This form details how much you paid in taxes over the previous year. Note that if you have more than one job, you’ll get multiple W2s - one from each employer.
  • Form 1099: A Form 1099 is similar to a W2, but whereas W2s are issued from an employer to their employees, Form 1099s track a self-employed person’s income5. Depending on how many clients you have, you may have several 1099s. Your 1099(s) may also end with a suffix, depending on the type of payment you received (i.e. debit cards, PayPal, investment earnings6.)

Supporting Evidence for Tax Credits and Deductions

Tax credits and deductions can potentially scale down your tax liability and increase your tax refund. But you may need to provide supporting evidence in order to successfully claim them.

Tax Credits

A tax credit is a direct, dollar-for-dollar reduction of your overall tax bill. In theory, these credits reduce the financial burden of taxes on households under a specific income level. 

Here are some examples of common tax credits and the documentation you’ll need.

  • The child tax credit, or CTC, is defined as “an annual tax credit available to taxpayers with qualifying dependent children7.” Under the rules set by the IRS, this credit offers up to $3K per qualifying dependent child in your household if your income is under a specific threshold; for example, if you were a single parent of two children and earned less than $75,000 in the 2021 tax year, you could receive a $6K tax credit. This credit requires you to fill out a Schedule 88128 with the IRS.
  • The earned income tax credit (EITC) can potentially reduce your tax bill by thousands of dollars, depending on your annual income and the size of your household9. In order to claim this credit, you’ll need to provide crucial identifying information about each of your children via a Schedule EIC form10.
  • Undergraduate students and recent graduates can take advantage of the American opportunity tax credit, which could lower one’s tax liability by up to $2,50011. Note that in order to qualify for this credit, you must have taken college courses and accrued education expenses in the previous year; for example, in order to qualify for the credit when you file in 2022, you’d need to have taken courses in 2021. You will use a Form 1098-T12, sent to you by your school, to claim this credit. 

Tax Deductions

Whereas a tax credit subtracts money from your overall tax bill, a deduction lowers the amount of money you pay taxes on in the first place13. These often require more documentation than claiming a credit does, but can significantly reduce your tax liability and, in so doing, increase any refund you may receive.

Here are some of the most common tax deductions in the United States, as well as the supporting evidence you’ll need.

  • Homeowners who are paying off a mortgage may be able to take advantage of a mortgage interest deduction14. The size of the deduction depends on the interest you paid on your mortgage (up to $750,000) in the previous tax year; for example, if you took out a $650,000 loan to buy a house in 2021, you could deduct the interest you paid on that loan between January 1 and December 31 of that year when you file in 2022. In order to claim this deduction, you’ll need a Form 109815 sent to you from your mortgage lender.
  • If you paid more than $600 in student loan interest last year, you might qualify for a student loan interest deduction of up to $2,50016. You’ll use a Form 1098-E, commonly called the “student loan interest deduction form,” to claim it. You should have received this form in the mail at the beginning of the year if you qualify for the deduction17.
  • A medical expense deduction can help offset some of the hefty costs of medical care, as the IRS allows you to claim unreimbursed qualifying medical expenses that exceed 7.5% of your adjusted gross income18. Just make sure you have receipts from the expenses you’re claiming so you can verify their authenticity if necessary.

This isn’t a complete list of the credits and deductions you could qualify for! Familiarize yourself with all the options available to help lower your tax bill, then gather the supporting evidence you need to legitimize your claim to them. 

3. A Plan for Next Steps

Filing your taxes can end in one of three ways: breaking even, receiving a tax refund, or owing money to the Internal Revenue Service (IRS.) If you broke even this year, then your work is done! But if you receive a refund or an additional tax bill, you have a few more things to do.

If You Get a Refund

Many Americans look forward to getting a yearly cash windfall in the form of a tax refund, and it can be tempting to spend it all if you don’t have a plan for how you’ll use it. But it’s important to be careful and to prepare for the unexpected, especially in these turbulent economic times.

Although it may feel like “extra money,” a tax refund is just the government returning the extra money you paid them last year, and it should be treated like a standard (albeit bigger than usual) paycheck. Here are some ways to get the most out of it.

  • Pay off credit card debt. The average credit card interest rate is around 14%19. At that rate, credit card debt can really add up if it’s not paid off quickly! Use all or part of your tax return to eliminate your credit card balance, and if your credit card debt is bigger than your refund, consider refinancing with a personal loan. There are many debt consolidation or credit card refinance options on the market, including personal loans through Upgrade.
  • Start or contribute to your emergency fund. An emergency fund provides a buffer between you and financial stress when unexpected expenses (i.e. medical care, home repairs, car fixes) arise. It can also help you prepare for a recession and its possible effects on your finances. Conventional wisdom suggests saving three to six months of living expenses. Your tax refund will make a great contribution to this goal!
  • Make a big purchase. You may have large expenses you’ve been putting off, like a major car or home repair. In that event, your tax refund can provide the cash boost you need to pay for it upfront without breaking the bank. 

Want more information about these tips? Need a few more suggestions for what to do with your refund? Check out our guide to using your tax refund wisely!

If You Owe Money

If you didn’t account for all your income sources, had a major life change (e.g. an inheritance, a major promotion/pay raise, getting married or divorced) that affected your taxable income, and/or had too little withheld from your paycheck last year20, you may end up owing money to the IRS. You can either pay the whole bill up front, or spread your payments out over time.

  • If you pay it all at once, the IRS accepts tax bill payments in three ways: two online and one offline. Your online options include the Electronic Federal Tax Payment System (EFTPS) and Direct Pay21. If you’d prefer to pay the old-fashioned way, you can send a check to an IRS Service Center via the U.S. Postal Service. Note that the address you’ll send the check to depends on your state, so if you choose this method, make sure to send it to the right place22.
  • If you pay in installments, you have two plan options: short-term, in which you make larger payments and complete your bill in 120 days or fewer, and long-term, in which you make smaller payments over a longer period23.

Everyone’s situation is different, so consult with a tax professional before making any major decisions. And no matter what, keep calm and stay focused - your taxes will be done before you know it.

Good luck with filing!

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