Americans learn a lot of stuff in school that they frankly never use again from writing in cursive to long division to how to diagram a sentence.
In fact, a survey of 2,000 adults commissioned a few years back by H&R Block found that 84 percent of people learned things in school that they've never used after graduation. The average respondent also said that over half of the skills they use in the workforce were learned on the job, rather than in school.
That same survey found that some of the things adults wished they had been taught in school included money management (57 percent) and how to properly file taxes (44 percent).
"It's clear from the results that a lot of Americans aren't as confident as they'd like to be when it comes to many day-to-day life skills, including how to file their own taxes," says Heather Watts, senior vice president and general manager of digital at H&R Block, in a statement.
First Step: Do I Need to File a Federal Tax Return?
When it comes to the basics of filing your taxes, you need to make sure “Uncle Sam” is getting his cut of your paycheck or you could be in some trouble with the Internal Revenue Service (IRS), which oversees the collection of taxes for the federal government.
The first thing to determine is if you need to file a federal tax return. You can use the IRS online interview tool to find out if you need to file a tax return or you can use the IRS filing threshold chart:
For Tax Year 2022 Filing Thresholds by Filing Status:
- Single (under 65): You must file if your gross income was at least $12,950.
- Single (65 or older): $14,700.
- Head of household (under 65): $19,400.
- Head of household (65 or older): $21,150.
- Married filing jointly (under 65, both spouses): $25,900.
- Married filing jointly (65 or older, one spouse): $27,300.
- Married filing jointly (65 or older, both spouses): $28,700.
- Married filing separately (any age): $5.
- Qualifying surviving spouse (under 65): $25,900.
- Qualifying surviving spouse (65 or older): $27,300.
Note that self-employed individuals are required to file an annual return and pay an estimated tax quarterly if they have net earnings from self-employment of $400 or more.
A person who is claimed as a dependent may still have to file a return. It depends on their gross income, including earned income (salaries, wages, tips, professional fees, and other amounts received as pay for work actually performed) and unearned income (investment-type income and includes interest, dividends, capital gains, rents, royalties, etc.).
Nerd Wallet says that regardless of income, people should generally file taxes if:
- They received distributions from a health savings account, Archer Medical Savings Account, or Medicare Advantage MSA.
- They owe taxes on an IRA, health savings account, or other tax-favored account.
- They owe taxes on household employees.
- They owe alternative minimum tax.
- They made more than $108.28 from a church or church organization.
- They owe recapture taxes.
- They owe Social Security or Medicare tax on tips they did not report to their employer or that their employer did not already take out of their pay.
IRS Says to Follow These 6 Steps to File Your Federal Taxes
The reality of filing your federal taxes is that over the years there have been a lot of tears, broken No. 2 pencils (in the pre-Turbo Tax days!), and some hair loss trying to meet this unavoidable obligation.
“Nothing is certain except death and taxes,” quipped Ben Franklin in 1789 and he was a wise man.
The Tax Foundation reported that estimates from 2022 were that the average individual taxpayer spent 13 hours and $240 out-of-pocket in costs to prepare and file an annual return.
“Our complex tax code spans some 9,834 code sections, with detailed subsections, and a six-volume set of corresponding regulations, according to the National Taxpayer Advocate,” said the Tax Foundation.
The IRS says that taxpayers can follow these six steps to file their federal income tax return:
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They need forms and receipts that show the money they earned and the tax-deductible expenses they paid. These include:
a. A W-2 form from each employer.
b. Other earning and interest statements (1099 and 1099-INT forms).
c. Receipts for charitable donations; mortgage interest; state and local taxes; medical and business expenses; and other tax-deductible expenses if they are itemizing their return.
- Choose their filing status. Filing status is based on whether you are married. The percentage you pay toward household expenses also affects your filing status.
- Decide how you want to file your taxes. The IRS recommends using tax preparation software to e-file for the easiest and most accurate returns. If you file by mail, it can take up to six months for the IRS to process your return.
- Determine if you are taking the standard deduction or itemizing your return.
- If you owe money, learn how to make a tax payment, including applying for a payment plan.
- Submit your return by the filing deadline.
Doing Your Taxes: DIY or Hiring a Tax Pro?
Simple … right?
Well, the USA Today reports that it all depends on your situation.
“Is doing your own taxes a good idea?” asks the publication. “Like almost anything related to taxes, it’s complicated. It depends on how messy your finances are, how much you hate doing taxes, or if you’ve had a recent life change.”
USA Today says to do taxes yourself if:
- Have a limited number of income sources and plan to take the standard deduction.
USA Today says it makes sense to hire a tax pro “anytime your taxes are complicated.”
“Hiring a pro is a prudent choice after a major life change like getting married or divorced, having a baby, buying or selling a home or business, experiencing a major health issue, or retiring,” says USA Today. “Paying a tax professional is also wise if you now receive income from many different sources, have investment losses you need help dealing with, received an inheritance, or settled an estate.”
Help! What Tools are Available for Those Filing Their Taxes
If you decide to do your own federal tax return, there are free programs and tools that can help you.
Check out some of the programs:
o VITA – You may qualify if at least one of these is true:
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- You make $60,000 a year or less.
- You have a disability.
- You speak limited English.
o TCE - This program focuses on questions about pensions and retirement-related issues. It offers free tax help to all taxpayers, particularly those who are 60 or older.
- IRS Free File: This online program can help you prepare and file your federal tax return. You may be eligible if your adjusted gross income (AGI) is $73,000 or less.
- MilTax: This Department of Defense program offers free tax assistance to military service members including:
o Get help with tax preparation services.
o Use free filing software.
o Consult with professionals experienced with military tax issues.
Check out some of the free IRS tools that can help you with tax questions and preparing your return:
How Do I Know that the IRS Received My Tax Return?
There are various ways to follow up with the IRS and find out if your tax return was received including checking online, calling the IRS, and other methods. Here are the ways to make sure your tax return gets to the right place:
- If you are receiving a tax refund, check its status using the IRS Where’s My Refund tool. You can view the status of your refund for the past 3 tax years.
- If you owe money or are receiving a refund, you can check your return status by signing in to view your IRS online account information.
- Call the IRS. Wait times to speak to a representative may be long. When you call, be ready to give your:
o Social Security number and birthdate.
o Filing status: Are you single, married, or head of household?
o Any prior communications from the IRS.
- Look for email or status updates from your e-filing website or software.
- If you used USPS Certified Mail or another mail service with tracking, check with them to see if your return was delivered.
Don’t Forget to File Your State and Local Taxes
Federal income taxes and the IRS get all the publicity but, in many states, counties, and cities you may have to pay taxes on income, property, and what you buy.
The different types of taxes you may have to file:
- Income Tax: The amount of state and local income tax you pay will depend on how much income you earn and the tax rate of the state or locality where you live. Currently, 41 states collect income taxes (Texas is one state that does not collect state income tax).
- Personal Property Tax: You may have to pay taxes based on the value of your personal property. Personal property can include cars, boats, recreation vehicles, and business machinery. Not all states or local jurisdictions collect personal property taxes.
- Real Estate Tax: In most cases, you will pay your real estate tax to your local government instead of your state government. Your local government’s tax office assesses the value of your home, and the amount you pay can depend on your home’s market value, location, and condition.
- Sales Tax: The sales tax you pay is based on a percentage of the sales price of an item you buy. Most states and municipalities have a sales tax and charge different percentages on different goods, or not at all for other items.
To learn how much you owe, how to pay, the due date, and how to get tax relief:
