Tax Season Survival Guide
Tax season is here, and with it comes a wave of stress and anxiety for many people. But don’t worry—this year, you can tackle your taxes with confidence. With the right approach and preparation, you’ll have all the tools you need to navigate tax season smoothly. This guide will answer your most pressing questions and provide tax survival tips to help you through the process.
What Is the Deadline to File My Taxes?
Tax deadlines are critical, and missing them can lead to penalties, interest, and added stress. Understanding these deadlines and planning accordingly is the first step to a smooth tax season.
Standard Filing Deadlines
The standard deadline for filing federal income taxes is April 15th each year. However, if April 15th falls on a weekend or a federal holiday, the deadline is moved to the next business day. For the 2025 tax season, taxes must be filed by April 15, 2025.
If you’re filing a state tax return, deadlines may vary depending on the state. Be sure to check the requirements for Alabama or your specific state to avoid any confusion.
For Self-Employed Individuals
If you’re self-employed, you have an additional obligation to pay quarterly estimated taxes throughout the year. These payments are due on:
April 15th (for income earned January-March)
June 15th (for income earned April-June)
September 15th (for income earned July-September)
January 15th of the following year (for income earned October-December)
Failure to meet these deadlines could result in penalties, even if you pay your full tax balance by the annual filing deadline.
Extensions and What They Mean
If you’re unable to meet the April deadline, you can file for an extension using IRS Form 4868. Filing this form gives you until October 15, 2024, to submit your tax return. However, this is an extension to file, not an extension to pay.
If you owe taxes, you’re still required to estimate and pay the amount by April 15th. If you underpay, you may be subject to interest and late-payment penalties. To avoid this, calculate your estimated tax liability and pay as much as possible by the original deadline.
For Businesses and Partnerships
The deadlines for businesses vary depending on the type of entity:
S Corporations and Partnerships: The filing deadline is generally March 15th, a month earlier than individual taxes. An extension gives you until September 15th.
C Corporations: These entities follow the same deadline as individual filers: April 15th, with an extension available until October 15th.
Why Filing Early is a Good Idea
Waiting until the last minute to file your taxes can lead to rushed decisions and errors, potentially costing you money. Filing early has several advantages:
Faster Refunds: If you’re owed a refund, filing early means you’ll get it sooner.
Less Stress: Early filing reduces the pressure and allows time to resolve unexpected issues.
Fraud Prevention: Filing early reduces the risk of tax identity theft, where someone files a fraudulent return using your Social Security number.
Being aware of these deadlines and their implications can save you from costly penalties and unnecessary stress. If you’re unsure about the deadline that applies to your situation, it’s always a good idea to consult a tax professional.
Can I File My Taxes After the Deadline?
Late Filing Penalties
Missing the tax deadline can lead to penalties. The failure-to-file penalty is typically 5% of the unpaid taxes for each month (or part of a month) that your return is late, up to a maximum of 25%. If you owe taxes, filing as soon as possible can help reduce penalties.
Steps to File After the Deadline
If you’ve missed the deadline:
Don’t delay further: Gather all your documents and file them immediately.
File electronically if possible: This speeds up processing and reduces errors.
Consider professional help: Tax experts can guide you in minimizing penalties and setting up payment plans if needed.
Who Needs to File a Tax Return?
The requirement to file a tax return depends on several factors, including your age, filing status, and income level. For the 2024 tax year, here are the general income thresholds that determine whether you need to file:
Single: If under 65, you need to file if your income exceeds $12,950. If 65 or older, the threshold increases to $14,700.
Married Filing Jointly: If both spouses are under 65, you must file if your combined income exceeds $25,900. If one spouse is 65 or older, the threshold increases to $27,300. If both are 65 or older, it’s $28,700.
Married Filing Separately: You must file if your income exceeds $5, regardless of age. This is significantly lower because of specific tax rules for this status.
Head of Household: If under 65, the threshold is $19,400. If 65 or older, it’s $21,150.
Qualifying Widow(er) with Dependent Child: If under 65, you must file if your income exceeds $25,900. If 65 or older, the threshold is $27,300.
Other Income Thresholds
In addition to the filing status thresholds, other types of income may require you to file a return even if your total income is below these amounts. Examples include:
Self-employment income: If you earned more than $400 from self-employment, you’re required to file a tax return to pay self-employment taxes.
Investment income: Unearned income, such as interest, dividends, and capital gains, might trigger the need to file a return depending on the amount.
Why Filing May Be Beneficial Even If Not Required
Even if you’re not required to file, there are reasons you might want to:
Refund of Withheld Taxes: If your employer withheld taxes from your paycheck, filing a return could result in a refund of those taxes.
Earned Income Tax Credit (EITC): If you qualify for the EITC, you must file a return to claim it, even if your income is below the filing threshold.
Recovery Rebate Credit: If you missed a stimulus payment from the government, filing a tax return may allow you to claim the missing amount.
Failing to file when required can lead to penalties and interest on unpaid taxes. Additionally, you may miss out on valuable credits or refunds. It’s always better to file, even late, than not at all.
What Is My Filing Status, and How Do I Determine It?
Your filing status is one of the most important factors in determining how much you owe in taxes—or how much of a refund you’ll receive. It affects your tax bracket, standard deduction amount, and eligibility for certain tax credits. Choosing the correct status is crucial to ensure you’re not paying more than necessary or leaving money on the table.
The Five Filing Statuses Explained
Single: This status applies if you’re unmarried, divorced, or legally separated as of the last day of the tax year (December 31).
Married Filing Jointly (MFJ): Married couples can combine their incomes, deductions, and credits on one tax return. This often results in a lower tax rate.
Married Filing Separately (MFS): This status may be beneficial if one spouse has significant deductions or if the couple wants to keep their finances separate. However, it often leads to higher tax rates and reduced eligibility for credits.
Head of Household (HOH): This status is for unmarried individuals who pay more than half the cost of keeping up a home for a qualifying dependent, such as a child or parent.
Qualifying Widow(er) with Dependent Child: Available for up to two years following the death of a spouse if you have a dependent child and meet certain criteria. This status provides the same tax benefits as Married Filing Jointly.
How to Determine Your Filing Status
Step 1: Assess Your Marital Status
Were you legally married on the last day of the tax year? If yes, you’ll likely file as either Married Filing Jointly or Married Filing Separately.
If not, you’ll consider filing as Single or Head of Household, depending on whether you have dependents.
Step 2: Evaluate Household Contributions
Did you pay more than half the cost of maintaining your household for the year? If yes, and you have a dependent, you might qualify for Head of Household status.
Step 3: Review Qualifying Dependents
Dependents can include children under 19 (or under 24 if full-time students), as well as certain relatives. Ensure they meet the IRS dependency requirements, such as living with you for more than half the year.
Step 4: Consider Long-Term Situations
If your spouse passed away, and you have a dependent child, determine if you qualify for the special Qualifying Widow(er) status.
What Documents Do I Need to File My Taxes?
Common Tax Documents
Here’s a checklist to get started:
W-2 Forms: For employee wages.
1099 Forms: For freelance, contract, or investment income.
1098 Forms: For mortgage interest or tuition payments.
Receipts: For charitable donations, medical expenses, or business costs.
Create a dedicated folder for tax documents. Sort them by income, expenses, and deductions to avoid scrambling at the last minute. Apps and online tools can help track expenses throughout the year.
What Is the Difference Between a Deduction and a Credit?
When it comes to reducing your tax liability, deductions and credits play crucial but different roles. Understanding the difference can help you maximize your savings during tax season.
What Is a Deduction?
A deduction reduces your taxable income, which is the amount of income the IRS uses to calculate how much you owe in taxes. By lowering your taxable income, deductions can move you into a lower tax bracket, effectively reducing the percentage of income that’s taxed.
For example:
If you earned $50,000 in 2024 and claim a $2,000 deduction, your taxable income becomes $48,000.
If your tax rate is 22%, this deduction saves you $440 in taxes.
Common deductions include:
Student loan interest
Mortgage interest
Charitable donations
Medical expenses (if they exceed 7.5% of your AGI)
What Is a Credit?
A tax credit, on the other hand, directly reduces the amount of tax you owe, dollar for dollar. Unlike deductions, which depend on your tax rate, credits provide full savings regardless of your income level or tax bracket.
For example:
If you owe $1,000 in taxes and qualify for a $500 credit, your tax bill is reduced to $500.
There are two types of credits:
Refundable Credits: These can reduce your tax liability to below zero, meaning you get a refund for the remaining amount.
Non-Refundable Credits: These can reduce your tax liability to zero but won’t result in a refund if there’s any leftover credit.
Should I Take the Standard Deduction or Itemize?
Benefits of the Standard Deduction
Most taxpayers benefit from the standard deduction because it simplifies the process. For 2024, the amounts are:
$13,850 for single filers.
$27,700 for married couples filing jointly.
When to Itemize
Itemizing is ideal if you have significant deductible expenses, such as:
Mortgage interest.
Large medical bills.
State and local taxes paid.
Are Unemployment Benefits Taxable?
If you received unemployment benefits in 2024, it’s important to know that they are generally considered taxable income. This means you must report them on your federal tax return, and they may also be subject to state income taxes depending on where you live.
When you receive unemployment compensation, you’ll get a Form 1099-G from your state’s unemployment office. This form lists the total amount of benefits paid to you during the year and the amount of any federal or state taxes withheld. Be sure to keep this document handy as it’s crucial for filing your taxes accurately.
How Taxes on Unemployment Work
Unemployment benefits are taxed as ordinary income, meaning they are subject to the same tax rates as your wages or salary. However, unemployment compensation is not considered "earned income," so it doesn’t qualify for credits like the Earned Income Tax Credit (EITC).
Planning Ahead
To avoid an unexpected tax bill, you can opt to have taxes withheld from your unemployment benefits. You can request this by filing Form W-4V with your unemployment office, which allows them to withhold 10% of each payment for federal taxes.
If you didn’t withhold taxes, consider setting aside a portion of your benefits to cover any taxes you may owe. For those who didn’t plan ahead, working with a tax professional can help you calculate and minimize any potential penalties or payment plans.
Can I Deduct Student Loan Interest?
Yes, you may be able to deduct student loan interest, which is a significant benefit for many taxpayers. The student loan interest deduction allows you to reduce your taxable income by up to $2,500 annually, making it a valuable tool for reducing your tax liability.
Eligibility Requirements
To qualify, the following conditions must be met:
Loan Purpose: The loan must have been used to pay for qualified higher education expenses such as tuition, room and board, or supplies.
Income Limit: The deduction is available for single filers with a modified adjusted gross income (MAGI) below $85,000 and married couples filing jointly with a MAGI below $175,000. The deduction begins to phase out as income approaches these limits.
Loan Ownership: You must be legally obligated to pay the loan. Payments made by someone else, such as a parent, may not qualify unless the loan is in your name.
How to Claim the Deduction
To claim this deduction, use the information on Form 1098-E, which your loan servicer provides if you’ve paid $600 or more in interest during the year. You don’t need to itemize your deductions to claim this benefit—it’s an “above-the-line” deduction, meaning it reduces your taxable income directly.
By taking advantage of this deduction, you can lower your tax bill and keep more money in your pocket—an important consideration for individuals managing the financial burden of student loans. If you’re unsure whether you qualify, consult a tax professional to guide you through the process.
Can I Deduct Medical Expenses?
Rules for Medical Deductions
Medical expenses can be a significant financial burden, but the IRS allows you to deduct certain costs if they exceed a specific threshold. For 2024, you can deduct qualified medical expenses that exceed 7.5% of your adjusted gross income (AGI). This means that you can only deduct the portion of your medical expenses that exceeds 7.5% of your total income.
What Expenses Qualify?
Medical expenses that qualify for deductions are quite broad and can include a wide range of healthcare-related costs. Some of the common expenses you can deduct include:
Doctor and dentist visits: Fees paid for medical services, including consultations and treatments.
Hospital bills: Any payments for hospitalization or surgeries.
Prescription medications: The cost of prescription drugs and treatments prescribed by a doctor.
Health insurance premiums: Premiums paid for health insurance, including private insurance and long-term care insurance.
Medical supplies and equipment: Items like hearing aids, eyeglasses, crutches, and wheelchairs that are necessary for medical care.
Therapies and treatments: Costs for physical therapy, chiropractic services, acupuncture, and other medically necessary treatments.
Transportation for medical care: You can deduct mileage and transportation costs for medical appointments if the purpose of the trip is for medical care, including travel by car or public transportation.
What Doesn't Qualify?
While many healthcare costs are deductible, there are some that don’t qualify, such as:
Cosmetic surgery: Unless it's necessary for medical reasons (e.g., reconstructive surgery following an accident).
Over-the-counter medications: Generally, these cannot be deducted unless prescribed by a doctor.
General wellness expenses: Costs like vitamins, supplements, and gym memberships are typically not deductible unless prescribed by a healthcare provider for a specific medical condition.
Conclusion
Tax season doesn’t have to be stressful or overwhelming when you have the right tools and information. By understanding your filing deadlines, knowing what documents to gather, and learning how to maximize deductions and credits, you can approach tax season with confidence.
Whether you’re deciding between the standard deduction and itemizing, navigating complex tax situations like unemployment benefits, or determining your filing status, preparation is key to avoiding last-minute panic and costly mistakes.
Still, have questions or need help? Contact First Choice Tax & Notary Solutions at (205) 541-8780. Our experts are here to guide you every step of the way and make this tax season your easiest yet!