How to file your taxes: Complete guidelines?

Tax season draws near, it’s crucial to get a clear understanding of your overall tax situation to ensure you're prepared and file on time. Missing the deadline can lead to complications—not only will your taxes are due, but you'll also face penalties each month until your balance is paid and your return is filed. Tax filing involves multiple steps and may require some re-planning to comply with current regulations. This blog provides a comprehensive guide to key aspects, including important deadlines, filing options, tax credits, deductions, and refunds.

Key Considerations for Tax Filing

There are several important factors to consider when filing your taxes. Let’s dive into some key details, from standard deductions to credits you might qualify for.

• Standard Deduction: Instead of itemizing deductions like mortgage interest or medical expenses, you can take the standard deduction, which reduces your taxable income by a fixed amount. This simplifies the process.

For the 2024 tax year, the standard deduction amounts are:

• Single filers: $14,600
• Married couples filing jointly: $29,200
• Heads of household: $21,900

Over-withholding

If too much tax was withheld from your paycheck during 2024, you may be entitled to a refund. Ensure you gather all your W-2 forms and include them when filing your return.

Earned Income Tax Credit (EITC)

If your income is below $66,819 for 2024, you could qualify for this credit, which can either boost your refund or reduce your tax liability. The financial benefit ranges from $600 to $7,830, depending on the number of qualifying children or whether you have no children. To qualify, you must be between 25 and 64 years old.

Child Tax Credit (CTC)

This credit helps with the costs of raising children, offering up to $2,000 per eligible child. If your credit exceeds your tax liability, you can receive up to $1,700 as a refund. To qualify, your Modified Adjusted Gross Income (MAGI) must be below $400,000 for married couples filing jointly, or below $200,000 for all other filers. Children must have Social Security Numbers (SSNs) to be eligible.

Child and Dependent Care Tax Credit (CDCTC)

This credit covers child care expenses or care for an incapacitated dependent while you work or look for work. It’s worth up to $1,050 for one qualifying person, or up to $2,100 for two or more qualifying individuals. You can claim up to $3,000 in expenses for one person and $6,000 for two or more.

Education Tax Credits

If you paid for higher education in 2024, you may qualify for the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC). The AOTC is worth up to $2,500 per student for the first four years of postsecondary education, with 40% refundable. The LLC offers up to $2,000 per return and can be claimed for an unlimited number of years, although it is non-refundable.

Ways to File Your Taxes

You have several options when it comes to filing your 2024 tax return:

• In-person, full-service tax preparation: Programs like Volunteer Income Tax Assistance (VITA), AARP Foundation Tax-Aide, and Tax Counseling for the Elderly (TCE) offer free help to those earning $60,000 or less, people with disabilities, individuals with limited English skills, and seniors aged 60+.
• Remote, full-service tax preparation: MyFreeTaxes and other VITA providers offer remote assistance for those earning $66,000 or less.
• Free Self-Preparation: MyFreeTaxes provides virtual assistance for individuals earning $66,000 or less. VITA providers can also assist.
• Free Tax Filing for Service Members: Military personnel and their families can use MilTax, a free tool specifically for active-duty military, National Guard and reserve members, veterans, and their families.
• CPA Firms: Working with a CPA firm ensures that your taxes are filed accurately and on time. CPA firms offer personalized guidance, help with audits or IRS notices, and assist in navigating complex financial situations.
• IRS Direct File (Pilot Program): The IRS is testing a new online tax filing system, Direct File, in 12 states. This free option could help reduce your tax filing costs. Check the IRS website for details on availability in your state.

Step-by-Step Guide on How to File a Tax Extension

1. Determine Your Need for an Extension: The first step in figuring out if you need a tax extension is to assess your situation. Are you waiting on important documents? Do you need more time to meet with a tax professional? Pinpointing why you need the extension will help you plan better and make the most of the extra time.
2. Be Aware of the Deadline: The deadline to file a tax extension is usually the same as the regular tax filing deadline, which is typically April 15 in the U.S. If that date lands on a weekend or holiday, the deadline moves to the next business day. Be sure to mark this date on your calendar as the last possible day to request a tax extension.
3. Choose Your Filing Method: When you're thinking about filing a tax extension, you have two main options: e-filing or paper filing. E-filing is faster and more convenient, plus you get instant confirmation that your extension request was received. The IRS offers several e-filing options through its Free File partners. If you prefer, you can also mail Form 4868 to the correct IRS address. The choice really comes down to what works best for you and whether you have easy access to digital tools.
4. Estimate and Pay Any Owed Taxes: A key step in filing a tax extension is making sure you estimate and pay any taxes you owe by the original deadline. If you don’t, you could face interest and penalties on what you still owe. To avoid this, use the IRS’s tax estimation tools or talk to a tax professional to figure out your tax liability correctly.
5. Complete and File Your Tax Return by the Extended Deadline: Once you've successfully filed your tax extension, you'll have until the extended deadline, usually October 15, to submit your full tax return. Take advantage of this extra time to gather all the documents you need, sort out any financial issues, and make sure your return is accurate. Don't put it off too long, though—rushing at the last minute increases the chances of making mistakes and could lead to problems with the IRS.