Filing taxes may not be your favorite financial task, but it is one of the most important. Whether you've been doing it for decades or you're a first-time tax filer, understanding your options can save you time, stress — even money.
From hiring a professional to filling out a traditional paper form yourself, there are several ways to file — each with its own pros and cons. This guide will walk you through the basics, including figuring out whether you need to file taxes, how to calculate them, and what the best methods are for filing.
Does everyone have to file taxes?
Not everyone is required to file taxes each year, but most people do. Whether you have to file depends on these key factors:
Your income level. The IRS has minimum income thresholds based on your age and filing status. For example, in 2024, if you were single, under 65, and earned $14,600 or more, you’d need to file. Check
the IRS website to see if you need to file based on income. (Note: Even if you made less, you still may want to file a return to get a refund of taxes your employer withheld from your paycheck.)
Your filing status. There are several filing statuses: single, married filing jointly, married filing separately, qualifying surviving spouse, and head of household. Filing requirements vary based on whether you file taxes alone or with another person.
Other income sources. These could include freelance work, investments, retirement income, or unemployment benefits.
Special situations. You may need to file even if you earn less than the threshold. One example could be if you owe taxes on a self-employed side hustle or if you want to claim a refund or credit.
5 ways to file your taxes
Here are five common ways to file your taxes. But there are benefits and downsides to each. Here's a list of the pros and cons:
1. Do-it-yourself with tax software
Platforms like TurboTax and H&R Block can walk you through the process of filing taxes step by step.
Pros:
Easy to use
Fast refunds with e-filing
Built-in reviews to catch errors
Often free for simple returns
Cons:
2. Hire a tax professional
A certified public accountant (CPA) or enrolled agent can prepare and file your taxes for you, which may be especially useful if you have multiple income sources, own a business, or have had major life changes like moving to a new state or getting married.
Pros:
Expert advice and oversight
May help you reduce your taxable amount, depending on your situation
Complex situations can be handled with ease
Cons:
3. Use IRS Free File
If your adjusted gross income (AGI) is below a certain limit ($84,000 in 2024), you can use
IRS Free File to do your taxes through partner sites at no cost. The IRS defines your AGI as your annual gross income,
minus certain adjustments to that income (such as retirement plan contributions). Here are some advantages and disadvantages of IRS Free File.
Pros:
Cons:
4. Do your taxes by hand
If you’re a paper-and-pen kind of person, filing a paper return and mailing it in is still an option.
Pros:
Cons:
5. Use a local tax preparation service
Tax prep storefronts like Jackson Hewitt or Liberty Tax offer in-person tax prep for individuals who prefer to work with someone directly but want a more budget-friendly option than a certified public accountant (CPA).
Pros:
Cons:
How to calculate your taxes
Taxes in the U.S. are based on a progressive system, meaning the more you earn, the higher your tax rate on that segment of your income. Here's how to calculate your taxes in four steps.
1. Determine your gross income
This includes all sources of income, such as:
Wages
Tips
Freelance work
Dividends
Unemployment
Social Security
2. Subtract adjustments to get your adjusted gross income (AGI)
Adjustments include contributions to a traditional individual retirement account (IRA), student loan interest, or health savings account (HSA) contributions. You’ll subtract these from your gross income to get your AGI.
3. Apply deductions
Set by the IRS, the
standard deduction is the portion of income not subject to tax that you can use to reduce your tax owed. You can choose the standard deduction (a flat amount based on your filing status) or itemize deductions like mortgage interest, charitable donations, or medical expenses. If you’re a business owner, you may choose to itemize so you can deduct business expenses.
4. Apply tax credits and compute your final tax
Tax credits reduce your tax bill dollar for dollar. Some of the most common tax credits are the
Earned Income Tax Credit (EITC) and Child Tax Credit. Once these credits are applied, you’ll see if you owe money or are due a refund.
What documentation do you need to file taxes?
Being organized can make filing taxes much easier. Gather the following information before you start so you can easily plug it into the right spots on your tax return:
Social Security numbers (for you, your spouse, and dependents)
Wage income (W-2 forms)
Freelance work, bank interest, investment income (1099 forms)
Mortgage interest (Form 1098)
Property tax records
Retirement contribution information (IRA, 401(k))
Education expenses (Form 1098-T)
Health insurance forms (1095-A, if from the Marketplace)
Last year’s tax return (for reference)
Bank routing and account numbers (for tax return direct deposit)
Last steps before submitting
Once you have everything pulled together, finish up your return with these last steps:
Choose your filing method.
Complete your return, including all final income, deductions, and credits.
Review for errors and submit electronically — for the fastest refund — or by mail.
Keep a copy of your return for at least three years.
What to do if you owe taxes
Pay what you can. If you can't pay all of what you owe now, chip away at it to minimize penalties.
Check for errors. If your tax bill looks wrong, double-check your return or ask a professional.
Don’t ignore an IRS notice. Your bill won’t just go away and interest can continue to accumulate in the meantime. So be sure to respond to the IRS with a plan to pay.
Level up your finances with EarnIn
Filing taxes is just one part of managing your money. With EarnIn, you can get early access to your paycheck, avoid overdraft fees, and take control of your budget.
Whether you're saving your refund or you need to pay off a tax bill,
EarnIn's tools can help smooth out the bumps in your cash flow.
FAQs
When can I start filing taxes?
The IRS typically opens e-filing in late January. Check for a specific date starting in early January of the new year.
What happens if you don’t file your taxes?
You could face penalties, interest, and a delay in any refund you're owed. In serious cases, it can lead to wage garnishment or legal action.
What is the best method of filing taxes?
The best method depends on your situation. For most people, using tax software is the easiest. If your taxes are complex, it might be a good idea to hire a professional.
What services can you use to file your taxes?
Popular options include TurboTax, H&R Block, and FreeTaxUSA. Choose one based on your budget and needs.
Are there secure ways to file taxes?
E-filing through encrypted tax software or a professional is the most secure. Avoid mailing sensitive documents if possible.
Is it hard to file your own taxes?
Not necessarily. If your situation is simple, tax software makes it more manageable. But consider getting some expert help if you’re unsure.
Please note, the material collected in this post is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or services.
This Blog was sponsored by EarnIn. While the author received compensation, the information shared is grounded in independent research and intended to provide helpful and accurate guidance to readers.
EarnIn is a financial technology company not a bank. Banking Services are provided by Evolve Bank & Trust or Lead Bank, both member FDIC. The FDIC provides deposit insurance to protect your money in the event of a bank failure. More details about deposit insurance
here.
