A tax return is a yearly report to the government of what you earned, what you owe and what you already paid through withholding. If you paid in more than you owed, you get a refund. If you paid in less, you owe the difference. This guide explains the basics in plain English. It does not replace tax advice, and rules change from year to year.
Documents you will probably need
- W-2: from each employer, showing wages and taxes withheld.
- 1099 forms: for freelance income (1099-NEC), interest (1099-INT), dividends (1099-DIV) and investment sales (1099-B).
- 1098 forms: for mortgage interest and student loan interest, if you paid either.
- Records of deductible expenses and last year's return for reference.
Deductions versus credits
A deduction lowers the income you are taxed on. A credit lowers your tax bill directly. For example, in the 22% bracket, a $1,000 deduction saves about $220, while a $1,000 credit saves the full $1,000. Credits are more powerful dollar for dollar.
Standard or itemized deduction
Most people take the standard deduction, a flat amount that depends on filing status. You can instead itemize if your qualifying expenses, such as mortgage interest and charitable gifts, exceed it. Tax software compares the two for you.
Deadlines
The federal filing deadline is usually in mid-April, and moves to the next business day if it falls on a weekend or holiday. An extension gives you more time to file, not more time to pay. If you owe, pay by the original deadline to limit interest and penalties.
Why you got a refund or owed money
Your employer withholds tax based on the W-4 you filled out. If you had a second job, a big change in income or little withholding, you may owe. If you had too much withheld, you get a refund. You can adjust your W-4 any time, and the IRS Tax Withholding Estimator can help you target a result closer to zero.
Free ways to file
- IRS Free File: free guided software for eligible filers, and fillable forms for anyone.
- VITA: free in-person help from IRS-certified volunteers for people who qualify.
- Be careful with anyone who promises an unusually large refund or asks for a percentage of it.
Keep your records
As a general rule, the IRS suggests keeping tax records for at least three years after filing, and longer in some situations. Keep copies of returns and supporting documents.
Plan ahead with the Salary Calculator to see take-home pay and use the year-end money checklist before the new year. Unfamiliar words are in the glossary.
Common questions
What is the difference between a tax deduction and a tax credit?
A deduction reduces taxable income. A credit reduces the tax you owe directly, so a credit of the same dollar amount saves more.
Does an extension give me more time to pay?
No. An extension gives more time to file. Any tax owed is still due by the original deadline.
How can I avoid owing taxes next year?
Adjust your W-4 and use the IRS Tax Withholding Estimator so your withholding matches your tax.
Where can I file for free?
The IRS offers Free File and VITA volunteer help for eligible taxpayers. Visit IRS.gov to see options.