Here’s everything you need to know about doing your taxes

Last Updated March 2020
By Allen Foster

The IRS has extended the 2020 tax-filing deadline from April 15 to July 15, so you have an extra 90 days to prepare and pay last year's taxes.

Tax season used to be a nightmare. It produced a great deal of stress for the average American because it was overly complicated and the laws changed every year, making it impossible to keep straight — unless preparing federal taxes was part of your job description. On top of that, the penalties for making a mistake could be financially debilitating, especially if they went unnoticed for any length of time.

Within recent years, however, sweeping changes have been made to the federal tax code that have drastically altered the filing experience for a majority of taxpayers. It doesn't necessarily make paying the IRS "fun," but it does simplify the process for many, and, depending on your individual situation, it could mean you will pay less, have a better chance for a return, or possibly not even need to file.

Since that might be baffling to many who have been conditioned to dread this time of year, the following article will answer all the pertinent questions that you might have about preparing your federal taxes.

 

How much do I have to make to file taxes?

For anyone who has been paying federal taxes for more than a few years, the notion of not filing taxes is closely associated with being a bad person. Or at least being a bad American. After all, paying taxes is one of only two certainties in life. But that is no longer the case.

When filing your taxes, you can either itemize or take a standard deduction. If you opt for the standard deduction, it means that you can cut a specified amount (depending on your filing status) off of your income with no questions asked. For instance, the standard deduction for the majority of single filers is $12,200 (for 2019). What that means is, if you choose not to itemize (make that detailed list of every single one of your deductions), you can cut $12,000 off your income. If you made less than $12,200, then you do not need to file taxes. If you are filing as the head of the household, that number climbs to $18,350. And, if you are married and filing jointly, that amount bumps up to $24,400.

As appealing as it sounds to be able to legally skip the whole July 15 ordeal, in most instances it is not advisable — but not for the reasons that you might be thinking. Not filing taxes can mean you lose money. If you had a job where federal taxes were withheld from your paycheck, you may be due a refund (or a tax credit) that you will not get unless you file. Furthermore, there are instances where certain individuals, such as those who are self-employed or those who owe Social Security or Medicare tax from additional income like tips, may still be required to file.

 

Can I do my own taxes?

The short answer to that question is yes. However, the more important question to ask is "Do you want to do your own taxes?" Preparing your taxes might be much less complicated than it has been in the past, but it still requires a level of patience and meticulousness that can make the job frustrating or aggravating for individuals who do not possess those qualities. Additionally, there are a few other variables to consider that will help you decide if it’s better to do your own taxes or to seek help.

Cost can be a major factor that keeps some individuals from hiring a federally-licensed tax practitioner. If a $200 refund is possible, but it will cost $300 to get that refund, then it is not a wise decision to seek help. If your taxes aren't too complicated, however, and you think that you overpaid — meaning you might be entitled to a refund — it might be a better strategy to use tax filing software. This option could still help you get a refund, but will likely cost less than hiring a federally-licensed tax practitioner. 

Also, it’s important to remember that filing your taxes is free. You can do it on your own, especially if your situation is fairly straightforward. And — even if it isn't — as of January 2020, if you have an Adjusted Gross Income (AGI) of less than $69,000, then you may be eligible to partake in one of the most underused services the IRS has to offer: IRS Free File. Even if you have an AGI of over $69,000, you may still be eligible for limited free assistance from this service, which has been offered to taxpayers since 2001.

For some individuals, however, the choice isn't about temperament, filing complexity, or cost; rather, it comes down to comfort level. Having someone prepare your taxes for you does take away some of your personal control, but it also means that you have someone who is responsible for staying current with the federal tax code, pinpointing all the deductions that are available to you, and double-checking all of the math. In addition to freeing up your time and reducing your stress, if you hire a federally-licensed tax practitioner, aka an Enrolled Agent (EA), it means that you will have someone who can represent you if your return happens to be chosen for an audit.

 

How long does it take to do taxes?

Doing your taxes is like any other task in life: the better acquainted you are with the process, the more efficiently you can work. The time it takes to do your taxes will vary greatly depending on the complexity of your return and your familiarity with the nuances of filing. On average, a taxpayer can expect to spend somewhere between 10 to 15 hours gathering records, tallying numbers, and filling out the required forms. 

If your situation is simple — a single filer with no dependents who is taking a standard deduction — then the time will be considerably less. If you’re self-employed or you own your own business, ideally you will be doing little bits of tax preparation throughout the entire year, so your time spent keeping detailed records, tallying up totals, paying estimated taxes, and filling out the necessary forms will be far more than 10 to 15 hours.

 

What are the deadlines? 

Tax returns for 2019 can be filed and paid beginning on Jan. 27, 2020. The last day you can file your return and pay your taxes (without penalty) is Wednesday, July 15. If you are a member of the Armed Forces who is serving in a combat zone or you were hospitalized for injuries while serving in a combat zone, you’ll be granted a minimum 180-day extension. Additional days may be added to that extension depending upon other factors.

If you don’t have the money to pay your taxes in full by the July 15 deadline, it’s better to file without making the full payment — paying as much of the total as you possibly can to help keep penalties at a minimum — than it is to be late with filing. A better option is to request a short-term extension (120 days or less) or to file an Installment Agreement Request. Depending on a few variables, these options may allow you to waive or reduce some penalty fees, but you will still owe interest. 

If you are having difficulty completing your taxes on time, another option may be to request an extension. Just remember, this is not a get-out-of-jail-free card as you will be required to pay more than you would have paid if you filed on time.

 

How can I file for an extension?

The easiest way to request an extension is by visiting irs.gov and filling out Form 4868. Alternatively, your tax filing software should have a filing extension option or your federally-licensed tax practitioner will be able to file the extension for you. The process is not difficult, but many people have misconceptions about precisely what a filing extension is. 

An extension gives you more time to file your return (up until Oct. 15 of that same year), but it does not grant you an extension on when your tax payments are due. Your tax payment (even if it is just an estimated one) is still due by July 15. You will receive penalties for any outstanding balance that you owe after that date, plus you will be responsible for all interest that accrues.

 

When can I expect my refund?

If you are expecting a refund from overpaying your 2019 taxes, whether you have other bills to pay or you just want to treat yourself to something nice, that money cannot come quickly enough. If you e-file with direct deposit, a refund may come within 7 to 10 days. If you send your forms through the mail, 4 or 5 weeks may be required as your return will need to be digitized before it can be processed. Additionally, it is important to note that these are optimum estimates. In some instances, it is possible for your refund to take up to 2 months to arrive.

If you want a more precise answer for when you can expect your refund, believe it or not, the IRS has an app for that. With IRS2Go, you can not only check on your refund status, but you can make payments directly from your bank account and you can get free help with your taxes. In order to view the status of your refund, the app will need your social security number or ITIN, your filing status, and the exact amount of your refund.

 

How long do I have to keep tax returns and receipts?

If you research what the recommended time period is for keeping your old tax records, you will find answers ranging from 2 or 3 years to forever. However, if you listen to what the IRS has to say about this matter, you will discover a slightly more specific answer. Yes — slightly.

The vast majority of audits happen within 2 years of filing. Occasionally, an audit may happen 3 years later. However, in instances where a substantial error is discovered, the IRS can dig much deeper into your records. "Usually" (in quotes because this is the IRS's word choice), this digging doesn't go beyond 6 years. So, to be reasonably safe if audited (meaning you will have all the records the IRS will likely request), 7 years should be long enough to wait before shredding your tax documents. Some conservative accounting firms suggest 10 years, but ultimately, the decision comes down to your own personality type... and how much room you have for storage in your home.

 

Conclusion

Because of the Tax Cuts and Jobs Act (TCJA) of 2017, filing your federal income tax return is now easier than ever before. However, not everyone's situation is the same. The information presented in this article is meant to give you guidance so you can determine which approach makes the most sense for you. Whether you do your taxes yourself or with the help of the IRS, tax filing software, or a federally-licensed tax practitioner, it is important to be meticulous and start the process as soon as possible so you have sufficient time to complete and double-check all of the forms that are required for this year's tax return.

Allen Foster is a writer for BestReviews. BestReviews is a product review company with a singular mission: to help simplify your purchasing decisions and save you time and money. BestReviews never accepts free products from manufacturers and purchases every product it reviews with its own funds.