If you are a United States citizen you will need to file a federal income tax return every year to determine how much you owe in federal income tax. Although many people are intimidated by the thought of filing their tax return, there is no reason to panic each April. Income tax filing is a process that millions of people complete successfully every year.
Below are some important steps you should take to file your federal income tax return:
1. Find out if you are required to file a federal income tax return
While the majority of people are required to file and pay income taxes, there are certain low-income earners (as well as children) who are exempt. You will most likely have to file an income tax return, but you should check the IRS’ filing requirements before you proceed.
2. Determine your tax filing status
The federal tax filing statuses include: single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with dependent child. You may qualify for more than one filing status, in which case you will have to make a choice. In that situation, you should choose the filing status that will result in the lowest tax.
3. Calculate your dependents and personal exemptions
The IRS allows taxpayers to claim personal exemptions for themselves and their dependents. A personal exemption is similar to a tax deduction because it reduces your taxable income. For tax years 2009 and 2010, the maximum personal exemption is $3,650 ― note that your personal exemption amount may be less if your income exceeds a certain amount. Your personal exemption information must be 100% accurate on your tax return because it largely impacts how much federal income tax you owe.
4. Report your income for the tax year
Most people can simply review their W-2s (Wage and Tax Statements) to determine their annual income. This can get slightly more complicated if you have worked more than one job during the year. Furthermore, individuals who are self-employed will likely have to spend extra time on this part of the filing process.
5. Claim eligible tax credits and deductions
If you qualify for any tax credits or tax deductions, you will want to take advantage of them. Tax deductions reduce your taxable income and tax credits reduce the actual amount of tax that you owe ― both will increase your chance of receiving a tax refund. Make sure you understand how to properly claim any income tax benefits, as mistakes will delay the processing of your return.
If you are preparing your own income tax return, you may order IRS tax forms (and publications) for delivery by U.S. mail or you can access the forms online. All of the documents that you will need to file your federal income tax return should be available on the IRS website.
Federal Income Tax Forms
There are different types of individual income tax return forms. You must use the tax form that corresponds with your particular situation and allows you to claim the income, deductions, credits, etc. that apply to you. The most common types of income tax returns include the following:
- Form 1040 (U.S. Individual Income Tax Return) (a.k.a. “the long form)
- Form 1040A (U.S. Individual Income Tax Return) (a.k.a. “the short form)
- Form 1040EZ (Income Tax Return for Single and Joint Filers With No Dependents)
- Form 1040NR (U.S. Nonresident Alien Income Tax Return)
- Form 1040NR-EZ (U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents)
If preparing your own taxes is too overwhelming, or you just don’t have the time, consider hiring an experienced tax professional. If you have a complicated tax return or you have questions about claiming certain tax credits/deductions, using a tax preparer can help make the filing process less painful.
This article should help you understand how to file your federal income tax return. Although filing and paying taxes can be stressful, having the right information will reduce your risk of making costly mistakes.