How To File Taxes This Year: 2024 Tax-Filing Guide

Key Takeaways:

• Make sure that you file your tax return by the deadline.
• Decide how you plan to file your taxes – either online or via a tax preparer.
• Determine your most advantageous tax deduction strategy. 

How To File Taxes In 2024: Ultimate Tax-Filing Guide

The fast-approaching 2024 tax filing season taxes can be daunting, even if you’ve been through the process before.

However, our comprehensive 2024 Tax-Filing Guide provides you with a complete and easy-to-follow cheat sheet for a stress-free tax season.

It offers guidance for navigating the confusing maze of options, making filing your taxes far more manageable and less intimidating.

Here's how to file taxes before the April 18 deadline:

Step 1: Assess Your Tax Filing Obligations

Before assembling the documentation and records required to file a federal income tax return, you need to assess your filing obligations.

The requirements to file a federal income tax return depend on various factors, including your income, filing status, age, and tax dependents.

For those of you who were under 65 years old on December 31, 2023, the following criteria apply:

• Single individuals with a gross income of at least $13,850.
• The head of a household with a gross income of at least $20,800.
• Married couples (under 65 years old) filing jointly and earning at least $27,700.
• Married couples (one spouse under 65 years old) filing jointly and earning at least $29,200.
• Married individuals who file their tax return separately and earn at least $5.
• A qualifying surviving spouse who earns at least $27,700.

For those of you who were 65 years or older on December 31, 2023, the following criteria apply:

• Single individuals with a gross income of at least $15,700.
• The head of a household with a gross income of at least $22,650.
• Married couples (65 years or older) file jointly and earn at least $30,700.
• Married couples (65 years or older) file separately and earn at least $5.
• A qualifying surviving spouse who earns at least $29,200.

Even if you have no obligation to file a return, possible tax breaks, including the earned income tax credit or child tax credit, make filing taxes worthwhile.

The basic accounting principles are used to calculate your business income and expenses and help to ensure that your figures are accurate.

Step 2. Explore Tax Credit Eligibility

If taxes were withheld from you according to gig worker law, you may be eligible for tax credits or deductions that may result in a refund.

You may be eligible for one or more of the following tax credits:

• If you made estimated tax payments, filing can reconcile any differences and avoid overpayment through eligibility for an Earned Income Tax Credit (EITC).
• EITCs are a valuable credit for low to moderate-income earners, as is the additional child tax credit, which provides additional financial relief.
• You may be eligible for the American Opportunity Tax Credit (AOTC), which is based on the expenses paid for higher education for up to four years. The maximum credit allowed for the AOTC is $2,500 per year for each eligible student, with a further 40% refund if your tax is zero.
• For lower-income households, the Premium Tax Credit (PTC) offers you the chance to reduce your tax through qualifying marketplace health insurance.
• If you make a living as a landscaper, farmer, in manufacturing, or in construction, then the Fuel Tax Credit (FTC) may offer you additional tax savings. The credit is in place to encourage businesses to use renewable fuel sources when utilized in offroad activities in the qualifying industries.

Filing your return may also prevent the IRS from sending you notices, especially if there are discrepancies in your reported income.

Step 3. Legal Obligation To File A Tax Return

Not everyone has a legal obligation to file a federal income tax return, but you may find that it is to your financial benefit to submit a return.

If you exchanged, bartered, or received money from the sale of assets such as stocks and bonds, the broker-dealer reports these on a Form 1099-B, which is used to calculate whether you have incurred a capital gain or loss on your federal taxes and state income tax.

You are required to file a federal income tax return if you received any of the following:

• Filing may be necessary if you received Form 1099-B to ascertain whether you are liable for short- or long-term capital gains tax.
• If you were self-employed during the tax year and received net earnings of at least $400, you must submit a tax return.
• Anyone who receives distributions from health savings accounts, an Archer Medical Savings Account, or Medicare Advantage MSA must file a return.
• You must file a return if you owe taxes on an IRA, health savings account, or any other tax-favored account.
• If you hired an employee to perform household work and they were under your direct control, then you must file a return.

Step 4. Keep Track Of Important Tax Deadlines

While everyone knows what the tax deadlines are, it’s easy to forget that it takes time to prepare the documentation and fill in your forms.

You should, therefore, work backward from the tax deadline and give yourself plenty of time to prepare your federal income tax return, including time to obtain documents.

This is one of the most important financial tips to ensure your federal income tax submission is ready on time.

Key Dates

The IRS commenced accepting 2023 tax returns on January 29, 2024, with the filing deadline of April 15, 2024, with extensions until October 15, 2024.

The IRS requires you to pay your federal taxes by Monday, April 15, 2024, except for citizens living in Maine or Massachusetts.

An additional two days are allowed in those states due to Patriots' Day and Emancipation Day holidays, extending the deadline to April 17, 2024.

Failure To Submit A Tax Return

Failure to submit your tax return on time attracts a 5% penalty on unpaid federal taxes for each month or part thereof that you’re late.

Should you exceed 60 days, then the minimum penalty is $435 or 100% of your total tax, whichever is lower.

A maximum penalty of 25% of your unpaid tax becomes due should your tax remain unpaid after 60 days or more.

Step 5. Select Your Tax Filing Method

Online filing is a very popular method, but if you’re eligible, consider the IRS Direct File program for free online tax preparation.

There are three main methods that you can use to file your taxes, with each one having its pros and cons.

Manual Filing

While it is possible to prepare your tax submission manually, it can become very confusing, as there are over 800 IRS forms.

Most don’t need every one of those forms, but filling in one form may require inputs from multiple other forms.

Keeping track of all these inputs and finding the correct form is made much easier by relying on tax software.

Online Filing Using Tax Software

There are many different tax software programs available, many of which interface quickly and easily with business accounting software packages.

You may be wondering about the benefits of using Xero vs. Quickbooks, but both offer the ability to process payroll and calculate federal income tax deductions.

The IRS free file program is trialing a free online tax preparation software called Direct File, which is available to eligible participants in these states:

• Arizona
• California
• Florida
• Massachusetts
• Nevada
• New Hampshire
• New York
• South Dakota
• Tennessee
• Texas
• Washington state
• Wyoming

Hiring A Human Tax Preparer

Filing your income tax returns is a complicated and time-consuming task, especially if you have various sources of income and multiple qualifying expenses.

It is also a full-time job keeping up with all the changes to the tax code that the government makes each year.

For this reason, it makes sense that you engage the services of a professional tax preparation agency, especially if your tax return is complex.

Qualified accountants are familiar with all the accounting terms and can quickly allocate your income and expenditures correctly.

Step 6. The Elements Affecting Your Tax Liability

The government calculates your taxes based on taxable income, tax brackets, age, and marital status.

We have a progressive tax system, meaning you pay increasing tax rates based on income levels.

State income taxes may also apply, depending on your location, and these taxes are not available using the IRS free tax filing software. You’ll most likely have to use another online tax program or hire a tax professional.

Choosing Your Filing Status

Choosing the correct filing status significantly impacts your tax liability and is determined by your marital status on the last day of the tax year.

Single

If you're unmarried for the entire year, file as "Single," but if you have dependents, opting for "Head of Household" might be more advantageous.

Married Individuals

For married individuals, "Married Filing Jointly" is a common option, allowing spouses to combine their incomes for potential tax savings.

You’re considered married if you live together, are in a common-law marriage, or are married but living apart without legal separation.

It's important to note that when filing jointly, both spouses can be held responsible for the tax, interest, or penalty due on the return.

If spouses do not agree to file jointly, they can choose "Married Filing Separately," which requires reporting individual income, credits, and deductions.

This may result in a higher combined tax than filing jointly, so it should be discussed thoroughly before going this route.

Head Of Household

"Filing as Head of Household" is suitable for single or unmarried individuals who pay more than half the cost of maintaining a home.

To qualify, you must also have a qualifying child or relative living with you for more than half the year.

Married individuals meeting specific criteria, such as living separately for the last six months of the year, can also file as Head of Household.

If you've experienced the loss of a spouse during the year, filing as "Qualifying Widow(er)" is an option for the following two years.

You will also qualify for married filing jointly in the year of the spouse's death while meeting other specified criteria.

Tax Benefits Of Marriage

There are a variety of tax benefits that accrue when you get married, such as making unlimited tax-free gifts to each other.

Spouses also enjoy some special options when inheriting an IRA, which can potentially defer the distributions for longer, minimizing taxes.

Married couples may only choose between Married Filing Jointly or Separately, with advantages like lower tax rates and eligibility for various tax credits.

Being married may alter your tax brackets, potentially resulting in a lower or higher tax rate depending on your combined income.

Combined incomes may enable the purchase of a home, with increased deductions for mortgage interest and an exclusion on gains from selling a home.

To qualify for the gains exclusion, you must both have been living in the home for at least two years before the sale is concluded.

Determining Your Deduction Strategy

A large part of your tax planning process relates to the choice you make regarding whether to take the standard deduction or not.

The standard deduction is a flat dollar amount you set off against your income rather than calculating each deduction separately.

While the standard deduction makes it quicker and easier to complete your submission, it can make a massive difference to your tax bill.

Itemizing your deductions takes longer to prepare and requires keeping a record of all the receipts and invoices.

 Step 7. Collect Essential Data For Tax Filing

Whether you decide to do it yourself or hire someone to help, you need to gather the following essential documents:

• W-2 Forms
• 1099 Forms
• Proof of Income
• Last Year's Tax Returns, including state taxes where applicable
• Charitable Donations
• Education Expenses
• Local and State Tax Payments
• Retirement Contributions
• Out-of-Pocket Medical Expenses
• Property Taxes
• Mortgage Interest

Preparing your tax submission will be much more efficient if all your documents are filed and readily available.

Using this tax prep checklist will help to keep you on track and make the process less daunting, minimizing the chances of overlooking crucial details.

Step 8. Review Deduction Opportunities

Take the time to review and investigate all the possible deductions beyond the standard ones for which you may be eligible.

Look into the opportunities for claiming business expenses, home office deductions, or student loan interest deductions to help reduce your taxable income.

Here’s a list of potential itemized tax deductions for individual tax returns:

• Medical Expenses
• State and Local Taxes
• Mortgage Interest
• Charitable Contributions
• Casualty and Theft Losses
• Student Loan Interest
• Tuition and Fees
• Property Taxes
• Energy-Efficient Home Improvements
• Employee Expenses that were not reimbursed
• Job Search Expenses
• Home Office Deduction
• Health Savings Account (HSA) Contributions
• Traditional IRA Contributions
• 401(k) Contributions
• Self-Employed Business Expenses
• SEP-IRA or Solo 401(k) Contributions
• Alimony Payments
• Tax Preparation Fees
• Gambling Losses
• Educator Expenses Deduction 

Here’s a list of potential business tax deductions if you’re self-employed:

• Business Meals and Entertainment Expenses
• Business Travel Expenses
• Home Office Deduction
• Vehicle Mileage Deduction
• Actual Expenses (e.g., gas, maintenance)
• Business Supplies and Equipment
• Rent or Lease Payments for Business Property
• Utilities for Business Property
• Business Insurance Premiums
• Professional Fees (e.g., accountant, attorney)
• Marketing and Advertising Expenses
• Depreciation on Business Property
• Repairs and Maintenance for Business Property
• Education and Training Expenses
• Employee Wages and Benefits
• Retirement Plan Contributions for Employees
• Self-Employed Health Insurance Deduction
• Business Interest Expense
• Bad Debts
• Startup Costs
• Legal and Professional Fees
• Charitable Contributions made by the Business
• State and Local Taxes for Business Property

Bear in mind that the rules related to business expenses are quite complex, so it is worthwhile discussing them with a tax professional first.

This is especially true when accounting for startups, where an accountant’s experience and specialist knowledge can quickly resolve any issues.

Step 9. File Your Tax Return

Once you've collected all your information and entered it into your tax return software, make sure that you have all the supporting documentation.

If you’re struggling, the IRS has a Volunteer Income Tax Assistance (VITA) program that can assist you free of charge if you’re eligible.

The program makes tax filing easier if you earn less than $60,000, have a disability, or have a limited ability to speak English.

For more complex tax submissions, we recommend you approach a qualified tax preparer to avoid making mistakes that may cause the IRS to penalize you.

If you are calculating gig worker tax deductions, it is best to approach an accountant familiar with the types of deductions available to you.

You may also contact the IRS for assistance via their online resources, phone support, or In-Person Assistance at Taxpayer Assistance Centers.

Step 10. Complete Your Tax Payments To The IRS

If you owe state and local taxes, make payment by the deadline or explore various payment options, including the IRS payment plans.

For those expecting a refund, file your taxes online for quicker processing and consider opting for direct deposit into your bank account.

If you are owed a refund, then use the IRS Where's My Refund tool or the IRS2Go mobile app to check your refund online.

Summary

Filing taxes doesn't have to be overwhelming, especially if you plan ahead and keep track of the deadlines.

Make your decision early regarding taking the standard deduction or itemizing your deductions to give yourself time to prepare.

Ask for help if you’re unsure of any of the steps, and use tax software to avoid getting confused when you file your taxes.

Give yourself plenty of time to file your taxes so that you can accurately claim tax credits and deductions to minimize your tax liability.