Ready or not, Tax Day will soon be upon us — April 15, 2025 to be exact. Follow these six steps to simplify the process of filing your taxes.
1. Gather all necessary documents
You might have elected to receive your tax documents electronically, or you could be working with old-school paperwork. Either way, the first step is to create some sort of system to collect and organize all your tax documents. The system doesn’t need to be complicated – it can simply be a digital or physical file where you collect everything you’ll need when filing your taxes.
For federal taxes, check out the tax checklist from the IRS, which lists every document and piece of information you will likely need to file. In addition to documents that represent income like a W-2, this checklist can also help you prepare for any income adjustments or credits you might be eligible for. If you plan to file for tax deductions for any expenses, keep in mind that you will also need to have receipts for those expenses ready when you file your taxes.
Read more: Be ready for tax season with savings buckets in an Ally Bank Savings Account.
2. Be aware of tax filing deadlines
If you file on a calendar year schedule, you must do so by April 15. If your return envelope is addressed, postmarked and deposited in the mail by the due date, it is considered on time.
If you need more time, you can file for an extension. Use form 4868 for an automatic six-month extension. Under certain situations (living in a federally declared disaster area; being stationed abroad or serving in a combat zone in the military; or being a citizen or resident alien living outside the U.S), you may qualify for an automatic extension without filing Form 4868. Consult your tax advisor to determine whether an extension form is necessary.
An extension to file your tax return does not extend the time to pay. If the tax owed is not paid by April 15th, you may be assessed interest and penalties on any outstanding amounts.
3. Learn which credits and deductions you can take
To reduce your tax burden, take advantage of credits and deductions. A credit is an amount you subtract from the tax you owe.
Deductions are amounts you subtract from your income, which reduces the total amount you pay taxes on. The standard deduction allows you to subtract a set amount based on your filing status. If your deductible expenses are more than this amount, you can save more money by itemizing your deductions.
A tax professional or tax filing software can help determine which credits and deductions you may be eligible for.
4. Make note of any changes
Every year can bring changes to tax regulations. Take a few minutes to make yourself aware of any that may affect you and your refund (or bill) for this tax year. Be sure to note any new filing requirements, which can be found on the IRS website.
Prior to filing, it’s also a good idea to reflect back on the previous year and make a list of any significant life events that might affect how you file. Any big milestones like buying a house, getting married, adding or losing dependents or a new job should be noted since you might be eligible for deductions or credits.
5. Decide how to file your tax return
You have a few options when it comes to actually filing your return. You can work with a tax professional, or you can use tax preparation software. With both of these options, make sure you budget for associated fees. If you’d like to file online for free, IRS Free File allows qualified taxpayers to prepare and file federal income tax returns using guided tax preparation software. But if you prefer a paper option, download the forms from the IRS website.
6. File your taxes
Once your return is complete, you will know if you will be receiving a tax refund or if you owe taxes. If you anticipate a refund, spend some time preparing how you will make the most of the extra money. From stashing it in savings to paying down debt, you have a number of options to make smart money moves with this windfall. You can even use your return toward any tax preparation fees.
If you owe taxes, you should pay the amount owed in full when you file your tax return or extension. Otherwise, you will receive a bill, which begins the collection process and could cause you to accrue a penalty and interest charges.
Prepare and conquer the season
It’s understandable to get a little stressed out during tax season. The paperwork, process and precision required can be overwhelming. But with a little bit of preparation and the right tools for the job, you can stress a little less about filing your tax return and stride through the season.
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