Step-By-Step Guide To Doing Your Own Taxes

Quick answer

• Gather all your income statements (W-2s, 1099s) and expense records.
• Choose a tax filing method: tax software, a tax professional, or paper forms.
• Determine your filing status and ensure all income is reported.
• Identify eligible deductions and credits to reduce your taxable income.
• Double-check all entries before submitting your return to the IRS.
• File by the tax deadline, or file an extension if needed.

What to check first (before you file or change withholding)

Filing Status

Your filing status determines your tax rates, standard deduction amount, and eligibility for certain credits. Common statuses include Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er). Choosing the correct status can significantly impact your tax liability.

Income Sources

Compile all documents showing income earned throughout the tax year. This includes W-2s from employers, 1099 forms for freelance or contract work, interest statements from banks, dividend statements from investments, and any other income like unemployment benefits or gambling winnings. Missing income can lead to penalties.

Withholding or Estimated Payments

Review your W-2 forms to see how much federal income tax has already been withheld from your paychecks. If you have significant income from sources other than a traditional job (like self-employment or investments), you may need to make estimated tax payments throughout the year. Adjusting your W-4 form with your employer can help ensure you’re not over- or under-withholding.

Deductions and Credits

Understand the difference between deductions and credits. Deductions reduce your taxable income, while credits directly reduce the amount of tax you owe. Common deductions include those for student loan interest or IRA contributions. Common credits include the Child Tax Credit or education credits. Researching what you qualify for is crucial for minimizing your tax bill.

Deadlines and Extensions

The primary federal tax deadline is typically April 15th each year. If this date falls on a weekend or holiday, it shifts to the next business day. You can file for an extension, which gives you more time to submit your return, but it does not extend the time to pay any taxes owed. Check the IRS website for the exact deadline each year.

Step-by-step (how to do taxes yourself step by step)

1. Gather Your Documents:

• What to do: Collect all W-2s, 1099s (for freelance, interest, dividends, etc.), receipts for deductible expenses, and any other relevant financial statements.
• What “good” looks like: You have a comprehensive folder or digital collection of every document needed to report your income and claim deductions/credits.
• Common mistake: Forgetting to collect all income forms, especially for side hustles or investment income.
• How to avoid it: Create a checklist of expected documents and cross them off as you receive them.

2. Choose Your Filing Method:

• What to do: Decide whether to use tax software (online or desktop), hire a tax professional, or fill out paper forms.
• What “good” looks like: You’ve selected a method that matches your comfort level with taxes, complexity of your return, and budget.
• Common mistake: Using a free online service when your tax situation is too complex, leading to errors.
• How to avoid it: Research the features and limitations of different tax software options or consult with a tax professional to understand their fees and services.

3. Determine Your Filing Status:

• What to do: Select the filing status that best applies to your situation (Single, Married Filing Jointly, etc.).
• What “good” looks like: You’ve accurately identified your filing status based on your marital status and dependents.
• Common mistake: Choosing a status that doesn’t align with your legal situation, potentially missing out on benefits.
• How to avoid it: Review the IRS definitions for each filing status carefully.

4. Report All Income:

• What to do: Enter all your income from W-2s, 1099s, and other sources onto your tax return.
• What “good” looks like: Every dollar you earned is accurately reported to the IRS.
• Common mistake: Omitting income, especially from freelance work or interest.
• How to avoid it: Match the income reported on your tax forms to the amounts on your W-2s and 1099s.

5. Identify Deductions:

• What to do: Determine if you can take the standard deduction or itemize your deductions. Review potential itemized deductions like mortgage interest, state and local taxes (SALT), or charitable contributions.
• What “good” looks like: You’ve chosen the deduction method that results in the largest reduction of your taxable income.
• Common mistake: Not keeping good records for expenses that could be itemized.
• How to avoid it: Keep receipts for all potential deductible expenses throughout the year.

6. Claim Eligible Credits:

• What to do: Research and claim any tax credits you qualify for, such as education credits, child tax credits, or energy credits.
• What “good” looks like: You’ve claimed every credit you’re entitled to, directly reducing your tax bill.
• Common mistake: Overlooking credits that could significantly lower your tax liability.
• How to avoid it: Use tax software prompts or consult IRS publications to identify potential credits.

7. Calculate Your Tax Liability:

• What to do: Use your taxable income (income minus deductions) and the appropriate tax brackets to calculate your total tax owed.
• What “good” looks like: Your tax liability is accurately calculated based on your income and filing status.
• Common mistake: Using the wrong tax brackets or miscalculating taxable income.
• How to avoid it: Double-check your math or rely on tax software to perform these calculations.

8. Review and Verify:

• What to do: Carefully review all information on your tax return for accuracy and completeness.
• What “good” looks like: You’ve proofread your return, ensuring all numbers and personal information are correct.
• Common mistake: Typos in Social Security numbers or bank account details for direct deposit.
• How to avoid it: Take a break and then review your return with fresh eyes, or have another trusted person look it over.

9. File Your Return:

• What to do: Submit your tax return electronically (e-file) or by mail by the deadline.
• What “good” looks like: Your return is successfully submitted to the IRS on time.
• Common mistake: Missing the filing deadline.
• How to avoid it: File early or file for an extension well before the deadline.

10. Pay or Get Refund:

• What to do: If you owe taxes, make a payment. If you’re due a refund, confirm your direct deposit information or expect a check.
• What “good” looks like: Any tax due is paid, and your refund is processed efficiently.
• Common mistake: Not paying taxes owed by the deadline, leading to penalties and interest.
• How to avoid it: Make estimated payments if necessary and ensure full payment is made by the tax deadline.

Common mistakes (and what happens if you ignore them)

Mistake	What it causes	Fix
<strong>Incorrect Filing Status</strong>	Overpaying or underpaying taxes; missing out on benefits.	Amend your return (Form 1040-X) to correct your filing status and recalculate your tax liability.
<strong>Omitting Income</strong>	Underreported income; IRS notices; penalties and interest.	File an amended return (Form 1040-X) to report the omitted income and pay any additional tax owed.
<strong>Math Errors</strong>	Incorrect tax liability; potential IRS notice.	If you catch it before filing, correct it. If after, file an amended return (Form 1040-X).
<strong>Forgetting to Sign and Date</strong>	Return is considered not filed; can cause delays or be treated as invalid.	If you filed on paper, sign and date it. If e-filed, ensure your electronic signature is complete.
<strong>Incorrect Social Security Numbers</strong>	Delays in processing; denial of credits/deductions; IRS notice.	File an amended return (Form 1040-X) with the correct Social Security numbers.
<strong>Not Claiming Eligible Credits</strong>	Paying more tax than necessary.	File an amended return (Form 1040-X) to claim the missed credits.
<strong>Not Keeping Good Records</strong>	Inability to substantiate deductions or credits if audited.	Reconstruct records as best as possible. For future years, establish a robust record-keeping system.
<strong>Missing the Filing Deadline</strong>	Failure-to-file penalty and interest on any unpaid tax.	File as soon as possible. If you can’t pay immediately, pay what you can and explore payment options with the IRS. File an extension if you need more time to file.
<strong>Incorrect Bank Information for Refund</strong>	Refund is delayed or sent to the wrong account.	Contact the IRS if you believe your refund was misdirected. You may need to file an amended return or claim it as a lost refund.
<strong>Claiming Deductions You Don’t Qualify For</strong>	IRS audit, disallowed deductions, penalties, and interest.	File an amended return (Form 1040-X) to remove the improper deductions and pay any additional tax owed.

Decision rules (simple if/then)

• If you have income from more than one employer, then you might need to adjust your withholding (W-4) to avoid owing taxes at year-end because multiple income sources can lead to under-withholding.
• If you are self-employed with net earnings of $400 or more, then you likely need to pay self-employment taxes (Social Security and Medicare) and make estimated tax payments because taxes are not withheld from your income.
• If you had significant medical expenses that exceed a certain percentage of your Adjusted Gross Income (AGI), then you may be able to itemize deductions because these expenses can be deductible.
• If you paid for qualified education expenses for yourself or a dependent, then you may be eligible for education tax credits like the American Opportunity Tax Credit or Lifetime Learning Credit because these credits reduce your tax bill directly.
• If you contributed to a traditional IRA, then you may be able to deduct those contributions, reducing your taxable income because IRA contributions can be a deductible expense.
• If you are married, then compare filing jointly versus separately to see which status results in a lower tax liability because one status is often more beneficial than the other depending on your incomes.
• If you received a large capital gain from selling investments, then you may owe capital gains tax because profits from selling assets are taxable income.
• If you are self-employed and expect to owe $1,000 or more in taxes, then you must generally make estimated tax payments quarterly to avoid penalties because the IRS collects taxes throughout the year.
• If you donated to a qualified charity, then you can deduct the value of your donation if you itemize because charitable contributions are a deductible expense.
• If you made payments on student loans, then you may be able to deduct the interest paid because the student loan interest deduction can reduce your taxable income.
• If you are unsure about your tax situation, then it is wise to consult a tax professional because complex situations can lead to costly errors if handled incorrectly.

FAQ

Q: What is the main deadline for filing federal taxes?

A: The typical deadline is April 15th each year, unless it falls on a weekend or holiday. You can request an extension, but this only postpones the filing date, not the payment date.

Q: What’s the difference between a tax deduction and a tax credit?

A: A deduction reduces the amount of your income that is subject to tax. A credit directly reduces the amount of tax you owe, dollar for dollar. Credits are generally more valuable than deductions.

Q: Do I have to file if I didn’t earn much income?

A: You generally must file a tax return if your gross income exceeds certain thresholds, which vary by filing status and age. Even if not required, you might want to file to claim a refund of withheld taxes or refundable credits.

Q: What if I can’t pay the taxes I owe by the deadline?

A: You should still file your return on time to avoid the failure-to-file penalty. You can then explore payment options with the IRS, such as an installment agreement or an offer in compromise. Interest and penalties will accrue on the unpaid balance.

Q: How do I know if I should itemize deductions or take the standard deduction?

A: You should compare the total of your potential itemized deductions (like mortgage interest, state and local taxes, charitable donations) to the standard deduction amount for your filing status. You choose whichever results in a larger deduction.

Q: Can I claim my adult child as a dependent?

A: Generally, a dependent must meet specific criteria, including relationship, residency, age, and financial support tests. An adult child can only be claimed if they meet all these requirements and you provide more than half of their support.

Q: What is tax software and how does it work?

A: Tax software guides you through the filing process by asking questions about your income and expenses. It helps calculate your tax liability, identify deductions and credits, and can often file your return electronically.

Q: What happens if the IRS audits me?

A: An audit means the IRS wants to verify the accuracy of your tax return. They will typically request documentation to support your claims. It’s important to respond promptly and provide the requested information.

What this page does NOT cover (and where to go next)

• State and local tax filing requirements (check your state’s Department of Revenue).
• Specific investment tax implications, such as cryptocurrency or complex stock options (consult a financial advisor or tax professional specializing in investments).
• Detailed guidance on business taxes or self-employment tax calculations for complex businesses (consult a CPA or tax advisor).
• International tax matters or expatriate tax laws (seek advice from a tax professional with international expertise).
• Estate and gift tax planning (consult an estate planning attorney or financial advisor).