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How to File a Tax Return Like a Pro

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This post may contain affiliate links. Please read my disclosure for more info.

If you’ve had some of your income withheld all year for taxes, you probably want to know how much money you’ll get back in your tax refund.

If you have investments that gave you dividends, you want to know how that income affects your tax liability (how much more you owe in taxes).

If you pay college tuition or have student loans, you may want to know how you can use deductions to reduce your tax burden.

You need to know how to file a tax return.

Let’s cover a few things:

  • What is a tax return?
  • What are some common tax forms?
  • How do I file a tax return?
  • Can I file a tax return for free? (Yes, if your adjusted gross income is under $69,000)

First, we need to know what a tax return is.

What is a Tax Return?

In the United States, a tax return is paperwork filed with the Internal Revenue Service (IRS) that provides information used to calculate how much you own in taxes and how much you can deduct (or not have to pay).

A tax return is different from what is called an “information return”. Information returns are documents like a Form W-2 which is provided to you and to the IRS by your employer. A W-2 includes information on the wages you earned and the federal and state taxes that were withheld from your paychecks.

When we refer to a tax return, we’re talking specifically about the IRS Form 1040 — Individual Income Tax Return.

Tax Return Form 1040

2019 IRS Form 1040 – U.S. Individual Income Tax Return

If looking at official forms makes your eyes cross or your stomach drop, don’t worry. I’ll provide a list of free and paid options to help you file in the How to File a Tax Return section.

To complete Form 1040, we’ll need supporting tax form documents that will be provided to you by sources like your employer, banks, loan originators, and investment fund managers.

Common Tax Forms and Deductions

Income Forms

Income forms provide information on all sources of your taxable income throughout the year.

  • Form W-2. Your employer provides a copy of this form to you as well as to the IRS. When you file your taxes, the IRS uses the information from your Form 1040 and your employer’s W-2 to verify the accuracy of your paperwork.
  • Form 1099. For employers and companies that make payments to third-party vendors, the IRS provides a list of reasons you may be required to file a Form 1099 (or other information return) that you, the employee, receive in order to file your taxes. Here are a few examples of Form 1099 and their relation to your income:
    • 1099-MISC: contract work-related payments
    • 1099-INT: interest on investments and U.S. Savings Bonds returns
    • 1099-DIV: dividends or other distributions to a shareholder
    • 1099-R: distributions from retirement plans, pensions, survivor income benefits, or retirement accounts like an IRA or a 401k
    • 1099-K: income gained working as a third party merchant (example: selling on Etsy or Amazon)

Deductions

According to the IRS’ article Credits and Deductions for Individuals, deductions get subtracted from your income before calculating the amount of tax you owe. Deductions help you reduce your tax liability.

We like deductions.

confetti and hands in the air

In the Credits and Deductions article, the IRS lists some of the following categories with resources for more extensive research:

  • Work Related Deductions
    • Employee Business Expense
    • Home Office
    • Business Entertainment Expenses
  • Itemized Deductions
    • Property Tax
    • Sales Tax
    • Charitable Contributions
    • Home Mortgage Interest
  • Education Deductions
    • Student Loan Interest
    • Work-Related Educational Expenses
    • Teacher Educational Expenses
  • Health Care Deductions
    • Medical and Dental Expenses
    • Health Savings Account (HSA)
  • Investment Related Deductions

I recommend checking out the list provided by the IRS for more information on these (and more) potential tax breaks. For several sections, like Student Loan Interest, the IRS provides free interactive tools to help answer questions like “Can I Claim a Deduction for Student Loan Interest?”

These resources will help you answer questions you didn’t even know you should be asking, and they provide vocabulary definitions within the content to increase your knowledge and save you time.

The IRS provides space on Form 1040 to add your standard deduction or itemized deductions. In their 2019 Instructions for Schedule A, the IRS says to use Form 1040 or (1040-SR if you’re a senior citizen) to calculate your itemized deductions. They recommend you compare your standard deduction with your itemized deduction total and file using the larger deduction, which provides you the largest tax break.

There is far too much information on deductions to include in a single article. Take a look at the IRS’ deduction list and see what may apply to you.

When you file your taxes, you should receive guidance on how to include deductions given your specific situation.

How to File a Tax Return

The IRS provides a list of items you’ll need to file a tax return. This list includes:

  • Last year’s tax return (if applicable)
  • Social security numbers for you and any dependents
  • Receipts for unemployment or social security benefits
  • Income information from your W-2 and any applicable 1099 forms

Your situation may require sending some or all of the above forms.

tax filing document and calculator

Filing Your Taxes

The most popular way to file taxes in 2020 (for the 2019 tax year) is by far TurboTax. And there are other options we’ll explore as well.

All of these filing services offer free versions for qualifying individuals based on income. Additionally, some services offer free filing for the most basic filing situations regardless of your income.

You qualify for free federal tax filing if your adjusted gross income is below $69,000. If that applies to you, check out How to File Taxes for Free.

TurboTax


TurboTax is the only software I’ve used to file taxes since 2006. I started using their services because they offered free filing for military members. I’ve continued to use TurboTax since I left the Air Force in 2012, including their paid services.

TurboTax makes the filing process very simple by importing all of your data from the previous year which also reduces your chances for errors. TurboTax guides your filing process by asking questions about your lifestyle and any changes from last year.

  • Did you make a work-related move this year?
  • Did you buy a house?
  • Did you attend college?

The guide helps you receive the largest possible refund.

I’ve had great experiences using their Basic and Deluxe versions online. You can also purchase TurboTax software on Amazon: TurboTax Basic 2019 and TurboTax Deluxe + State Filing 2019 (an Amazon exclusive).

TurboTax is the only product I can recommend from personal experience.

H&R Block

H&R Block is reviewed highly in my research.

They offer several online versions ranging from free personal use to paid small-business options.

Like TurboTax and others, H&R Block offers prior year data importing and guided filing.

They provide a great user experience for comparing their different services. For each of their services, they offer an overview of its primary features (like W-2 photo importing) and a list of the tax situations that the service covers like child care expenses, student loan interest, and retirement plan income.

You can save 30% on H&R Block’s online tax filing products.

TaxAct

Like TurboTax and H&R Block, TaxAct provides a free filing version. Their free version boasts free state filing as well.

Like the others, TaxAct imports last year’s tax data to make filing easy. If you’re moving from TurboTax or H&R Block, TaxAct can import data from those services using an exported Form 1040 in a PDF format.

TaxAct also offers a guided question format that helps you file taxes quickly.

Get Your Refund

Regardless of how you file your taxes, you’ll be able to see your refund status from the IRS’ refund page.

Once you receive your refund, consider using that cash to put yourself closer to financial independence. The article Early Retirement How-To in 5 Steps offers suggestions for destroying debt, building an emergency fund, and investing.

How to File Taxes for Free

The IRS offer guidance on how to file your federal taxes for free.

If your adjusted gross income is below $69,000, you’re eligible to use Free File software.

The IRS gives the definition of adjusted gross income:

Adjusted Gross Income (AGI) is defined as gross income minus adjustments to income. Gross income includes your wages, dividends, capital gains, business income, retirement distributions as well as other income.

They go on to say that if you file as Married Filing Jointly, the AGI limit applies to both of you combined.

irs federal taxes free file

Source: IRS Free File

This image is from an infographic that has more information about the IRS’ Free File program. In short, check out IRS.gov/freefile. Registration opens in January.

You can use the tools provided by the IRS, or you can use tax services like the TurboTax Free File Program which offers completely free filing for federal and state returns.

Tax Filing Made Simple

Filing your taxes doesn’t have to cost you a lot of time or money. In many cases, you may be eligible to file for free. The IRS states that 70 percent of tax payers can use Free File.

You know what a tax return is (Form 1040) and how it differs from an information return like your W-2 or a Form 1099. You know your options for taking a standard deduction or itemizing your deductions. And you’ve learned about free and paid options for tax filing software.

In short, you know how to file a tax return.

If you know of (or discover) better options for filing your taxes — using free or paid services — please leave a comment or let me know.

What services do you use and recommend?

 

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Lyle

6 Comments

  1. Thank you for this very timely piece of information! It’s definitely that time of year when people are concerned about the information they’ll need to get their taxes settled properly. Your article is even great for the beginner. I agree with your recommendation for H&R Block since they guarantee against any mistakes they might make. I recently learned that a new section has been added to this year’s tax forms regarding cryptocurrency investments. Investors and exchange platforms are complaining that the information wanted by the IRS is vague and unfair. The government should leave such things alone, but it’s important to make sure your tax preparer knows how to deal with this if you’re an investor like I am. Taxes are inconvenient, but filing them doesn’t need to be a nightmare if you have the right information, like what is provided in your article, to guide you.

    • Thank you, Cathy.

      Good call about H&R Block’s guarantee. Any trusted software will provide a similar guarantee, and many offer services in case you get audited by the IRS.

      You bring up an interesting issue with cryptocurrency. It will take the IRS, crypto platforms, and crypto traders time to figure out the best way to handle taxation and filing. But it’s interesting how quickly these things make it into software. things move quickly, that’s for sure.

      Thanks for the compliment!

  2. This post was very informative in regards to filing tax returns. It’s critical for taxpayers to understand basic terminology and the tax forms they’ll need to fill out.

    I know the basics of filing, but I’m not always up to par on every single detail. Especially if you’ve made income from different places, taxpayers want to make sure they’ve got their paperwork organized.

    I agree with you on Turbotax as well. I started using Turbotax in the last tax season, and I couldn’t have been more satisfied with the services. I’ll be using them again this upcoming tax season.

    Thanks for the excellent post. Like most people, paying taxes is frustrating. But articles such as yours are needed for taxpayers to comply with the current laws. 

    • Thanks for your comment, Eric.

      The IRS is constantly making changes, so it’s hard for the non-professional to always know how to file their tax return properly. I think software, for most people, is the best option — especially with the free options for 70% of tax payers.

      I’m glad you’re enjoying TurboTax. They’ve definitely made it easy for me to file.

  3. A very valuable post! I never knew about how to do this tax return, because so far my husband has always helped me to do tax reporting. So I just sat there looking after the baby and he did all that.

    But because of your writing, I have become more aware of how to do tax reporting specifically, tax returns. To be honest, I have an income of less than $ 69,000. Maybe, after this I will tell my husband about the Turbo Tax Program that you write here. So he can save a lot of time and the most important thing is More Happy with Less Drama. And speaking of Less Drama, do I need a tax consultant to do this tax reporting?

    Once again, many thanks!

    • Kylie,

      I didn’t know about the $69,000 adjusted gross income limit until recently. This information isn’t hidden, but it isn’t very easily available either.

      As far as needing a tax consultant, I cannot say whether you do or not. If you have a complex situation with lots of income sources (W-2 and 1099s) along with a laundry list of deductions, it may make sense for you to work with a professional to get the greatest refund and make sure you’re filing accurately.

      Best of luck, and thank you.

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