How to File Taxes in 2023: 7 Steps
Filing and paying taxes is a part of life for all of us, but it can still feel quite daunting for many. Whether it’s tracking deadlines, considering deductions, or just figuring out which forms you need to fill out, the tax process has many moving parts to keep in mind. In this guide, we’ll go over the top 7 steps to consider when filing taxes in 2023.
- The tax deadline for the 2023 tax year is April 18th, 2024, though you can get an extension until October 17th.
- The tax filing method you choose can make the filing process more efficient.
- You’ll need to collect and organize a number of records for tax filing.
- You should consider your deduction type (standard or itemized) and filing status to get the most out of your taxes.
- Accounting software can help make the tax filing process much simpler.
Table of Contents
- 2023 Tax Deadlines
- How to File Your Taxes: 7 Steps
- FreshBooks Makes Tax Preparation Simply
- Frequently Asked Questions
2023 Tax Deadlines
Tax Day in the United States typically falls on April 15th, but if the statutory due date is on a holiday or weekend, federal income tax returns and payments are due the next business day. The deadline to file your taxes this year is on April 18th, 2024, but you’re also able to file for an extension. If you get an extension to file your income taxes, you’ll have until October 17th, 2024.
Regardless of whether you file an extension or not, those who owe federal income taxes are required to pay by April 18th, 2024, or else face interest and penalty fees.
How to File Your Taxes: 7 Steps
So how do you go about the actual process of doing your tax return? Filling out this year’s income taxes doesn’t have to be confusing—here we’ve broken it down into 7 simple steps.
Step 1: Determine Whether You Need To File
First and foremost, it’s important to figure out whether or not you need to file income taxes at all. Most people will be required to pay federal income tax in 2023, but this depends on a number of factors, such as your gross annual income, your tax filing status, your age, and other scenarios, such as if you’re claimed by someone else as a dependent.
Even if you’re not required to file income taxes in 2023, there are a few reasons you might opt to anyway. You may be eligible for tax credits that would result in a refund, such as the earned income tax credit (EITC) or child tax credit.
Step 2: Choose a Tax Filing Method
Once you’ve determined that you need to (and should) file federal income tax in 2023, it’s time to consider how you’ll do the filing itself. While you can do all of it yourself, there are 2 preferred methods to get the most out of this year’s tax filing.
Online Tax Software
One of the most popular methods for tax filing is online tax preparation software. Tools like these make it simple to fill out every row of every tax form you’ll need to submit, all while helping you track income, tax credits, and tax deductions throughout the year. There are several popular options out there, some of which are better suited to different tax scenarios. Shop around a little to find the best option for you.
Hire a Tax Preparer
Hiring a tax prep specialist has long been a favorite filing method, especially for busy people with more complex tax needs. This is an especially good option for people who own businesses or receive significant passive income (rental property, market investments, etc.), as the filing requirements for these types of income vary from the common federal income tax filing process. Hiring a tax preparer can help take the burden of federal, state, and local taxes off of you this year, freeing you up to focus on your business and other pursuits.
Step 3: Gather Tax Filing Information
No matter which tax filing method you opt to use for the 2023 tax year, you’ll first need to collect all of your tax documents and other information. This includes proof of income, receipts of any tax-deductible expenses you’ve incurred, and proof of any state and local taxes you’ve already paid this year. Here are some other common pieces of filing information you may need to collect:
- Your social security number (and that of any dependants you claim)
- Any 1099 forms for income received by entities or persons that are not your employers
- W-2 form(s) to indicate your earnings from employment and any taxes already paid
- Records of contribution to your retirement accounts
- Records of charitable donations
- Proof of any state or local taxes already paid
- Records of property taxes and mortgage interest paid
- Receipts of any education expenses incurred
- Receipts for unreimbursed medical expenses incurred
- Your returns for federal, state, and local taxes from 2022
Filing taxes doesn’t need to be a hassle—use a tax preparation tool like FreshBooks to help take the pain out of 2023’s tax prep.
Step 4: Understand How Your Taxes are Figured Out
You probably already know that taxes are figured based on your taxable income bracket. But do you know how to determine your bracket for yourself? Each bracket of income is taxed at a different rate, so determining which one you fall into will help you better plan for this year’s federal income tax filing.
One common misconception of tax brackets is that your entire income is taxed based on which bracket it falls into. However, this is thankfully not the case. Instead, only the amount of income that falls into that bracket is subject to that tax rate, meaning the rest of your income will be subject to lower taxation.
Step 5: Choosing the Right Filing Status
Tax filers are required to indicate their filing status—this affects the rate at which your income is taxed, so it’s important to choose the right status for your situation. The 5 filing statuses are:
- Single: For those who are unmarried or legally separated from their spouse on the last day of 2023
- Married Filing Jointly: For married couples that both agree to file a joint tax return.
- Married Filing Singly: For married couples that opt to each file their own individual tax returns
- Head of Household: For those who 1) Are considered unmarried on the last day of 2023, 2) Paid more than 50% of the costs of keeping a home for the year, and 3) Lived with qualifying dependents for more than half the year
- Qualifying Widow(er) with Dependent Child: For people with dependent children whose spouse died within the last 2 years who want to continue to use the joint return tax rates
Step 6: Determine The Type of Deduction
Tax deductions reduce your taxable income and can make a big difference in your total tax bill. But first, you’ll need to determine which of the 2 deduction methods make more sense for your specific tax situation.
The standard tax deduction is available for most tax filers and offers a flat deduction rate depending on your filing status. The standard IRS deduction for the 2023 tax year is $13,850 for single filers, $27,700 for joint filers, and $20,800 for head of household filers.
If you incurred more deductible expenses in 2022 than your standard deduction amount, it’s best to itemize them and report each deduction separately on Schedule A (Form 1040). This takes more time and organization throughout the tax year to ensure you keep records of all expenses, but can potentially mean a big break on your tax bill this April.
Step 7: Settle Accounts With the IRS
When you’ve finished the above steps, all that’s left is to settle with the IRS. The process varies slightly depending on whether you owe income taxes or are owed a federal tax refund.
If You Owe Taxes
If you owe money to the IRS in income taxes, you have a few options on how to pay it. The IRS allows you to pay taxes online in the form of electronic payments, wire transfers, debit/credit card payments, or through other means like checks and even cash. If you can’t pay your entire balance right away, you might be able to get a short or long-term IRS payment plan (installment agreement), which allows you to spread out payments over a predetermined length of time.
If You’re Getting a Tax Refund
If you’re owed money by the IRS, you have the option of receiving your refund as either a direct deposit to your checking/savings account or as a paper check. It’s always best to opt for the direct deposit if you’re able, as you’ll receive payment much faster this way.
FreshBooks Makes Tax Preparation Simple
As you can see, a few important steps go into effective preparation for your 2023 federal tax returns. Ensuring the accuracy of each step will help you make the most of this year’s tax filing process, saving you money or possibly netting you a refund.
If you’re looking for a way to make tax preparation even simpler this year, consider looking into tax software like FreshBooks accounting software. This cloud-based tool helps you track and categorize expenses for eligible deductions, manage income from multiple sources, and overall make tax time as smooth as possible. Try FreshBooks free today and see how simple federal taxes can be.
FAQs About How to File Taxes
Do you have more questions about filing taxes the right way for the 2023 tax year? Here are answers to some of the top questions on this topic.
When can I file taxes on my own?
You can file taxes on your own when you’re no longer considered a dependent. Teenagers are considered dependents on their parents’ tax returns up until the age of 19 and are therefore not required to file their own taxes. Young adults who pursue post-secondary education can be further claimed as dependents by their parents until they’re 24.
Can you go 1 year without filing taxes?
While you technically can go a full tax year without filing a tax return, it is illegal, and you will be subject to penalties (including civil and/or criminal penalties) if you fail to file a tax return when required.
Is it worth doing taxes yourself?
If you have a very simple tax situation (e.g., all income received is from a single W-2 employer and you’re taking the standard tax deduction), it might be worth doing your own tax return by yourself.
However, in cases with any kind of tax complexity (e.g., income from more than one job, unemployment income, or if you are self-employed/run a small business), it’s usually best to either use tax software like FreshBooks to file taxes online, or to hire a tax preparer for support with filing your federal return.
What happens if you don’t file taxes?
If you fail to file your federal taxes (provided you have a filing requirement for that year), you’ll be subject to fairly substantial penalties from the IRS. This includes losing any refund you were eligible to receive on your tax returns, paying up to 25% of your tax bill in additional penalties, or even facing criminal charges in certain cases.
How much do you have to make to file taxes for the first time?
The IRS has minimum income thresholds, meaning you don’t have to file tax returns or pay taxes if your income is below that amount. The thresholds vary depending on age and filing status.
For the 2023 tax year, the single filer threshold is $12,950 (or $14,700 if you’re 65 or older). The married filing jointly thresholds are $25,900 if both spouses are under 65, $27,300 if only one spouse is 65 or older, or $28,700 if both spouses are 65 or older. The married filing singly threshold is $25,900 regardless of age. The head of household threshold is $19,400 if younger than 65, and $21,150 if 65 or older. Finally, the qualifying widow(er) with dependent child thresholds are $25,900 if younger than 65 and $27,300 if 65 or older.
How do you know if I need to file my taxes?
If your income is above the thresholds listed above for your relevant filing status, you are legally required to file an income tax return with the IRS. The IRS also offers an online interview tool to help you determine whether or not you need to file an income tax return. Keep in mind that you may still want to file your taxes to receive certain tax breaks and a refund, even if you’re not legally required to do so.
About the author
Sandra Habiger is a Certified Public Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Learn more about her work at http://www.sixfiguresaccounting.com/ .