You’re almost certainly paying taxes if you work for a regular paycheck. As a refresher, here's how it works: Your employer withholds the taxes you owe from your earnings each pay period and sends them to the appropriate federal and state governments on your behalf. But that's just the first step of the process. A great deal more is involved in filing your taxes correctly and in making sure you're not paying more than you have to.
In this guide, learn why and how you have to file a tax return, as well as other important aspects of the filing process you need to know.
Why You Have To File a Tax Return
When you begin a new job, you'll be asked to complete Form W-4 for your employer. The information you enter on this form determines how much in the way of taxes will be withheld from your pay. The decisions you make when you set up your payroll withholding by completing this form can easily result in under– or over-paying your taxes. Payroll withholding usually isn’t exactly right.
The IRS introduced a revised Form W-4 for the 2021 tax year, which you will file in 2022. It’s much easier to complete, guiding you through the process with various questions and eliminating the complicated allowances that once had to be figured out.
The IRS recommends updating your W-4 and withholding requirements whenever you experience a life event that could affect your tax obligation, such as marriage, the birth of a child, or receiving unexpected sources of income.
You’re required to file a tax return every year to come up with a final tally of your tax situation. The process determines whether you owe taxes beyond what you’ve already paid, or whether you’re owed a refund of the taxes that have been withheld. Your tax return is normally due on or near April 15 of the year following the tax year. In 2022, the year in which you'll file your 2021 tax return, the due date is April 18.
You might be able to reduce the taxes you owe—and get a refund of taxes you've already paid—by taking deductions and credits provided for in the tax code. Or you might have had additional income during the year that you’re legally required to report and from which no taxes were withheld. This can result in you owing the IRS more than you've paid throughout the tax year.
How To File a Tax Return
You have three options when it comes to filing your taxes:
- You can file manually by completing Form 1040 according to instructions provided by the IRS. This would require you to either e-file, or physically mail the form to the IRS, along with any payment you owe.
- You can use a tax software program or the website of a service like TurboTax or H&R Block. It will walk you through a series of questions about your income and potential deductions, fill out your 1040 based on your responses, and file it electronically for you.
- You can get professional help from an accountant or tax professional who will work with you to maximize your refund and fill out your tax return on your behalf.
The first option is free. If you go with the second option, you’ll likely have to pay a fee, although some programs offer free filing if your return is simple enough. The third option—professional help—will almost certainly cost you money.
The Free file partnership between the IRS and select tax preparation companies offers free tax preparation and e-filing to certain eligible taxpayers. To qualify in 2022, your adjusted gross income (AGI) must be $73,000 or less.
How Tax Brackets Work
How much tax you must pay begins with your total or "gross" income from all sources. You can then claim any deductions to which you're entitled. These subtract from your gross income to arrive at your taxable income.
The federal government uses a progressive tax system, which means that the higher your taxable income, the higher your effective tax rate will be. These rates are determined by tax brackets.
If your income is greater than a certain amount, you will be taxed at a certain percentage. In 2022, the tax brackets are as follows:
|Marginal Tax Rate||Single or Married Filing Separately||Married Filing Jointly|
|10%||$9,950 or less||$19,900 or less|
|12%||$9,951 or more||$19,901 or more|
|22%||$40,526 or more||$81,051 or more|
|24%||$86,376 or more||$172,751 or more|
|32%||$164,926 or more||$329,851 or more|
|35%||$209,426 or more||$418,841 or more|
|37%||$523,601 or more||$628,301 or more|
The IRS adjusts these taxable income amounts annually for inflation.
How Your Taxes Are Calculated
Your employer will give you a Form W-2 after the close of the tax year if you have a regular job. The form details how much you were paid and how much was withheld from your pay for taxes. This information is then transferred to your tax return and determines how much you owe—or are owed—in taxes or a refund.
Self-employed people and independent contractors receive Forms 1099. These don't detail withholding, because self-employed taxpayers are responsible for remitting their own taxes as the year goes on. Other 1099 forms might be issued to you from banks or investment firms where you’ve accumulated interest or dividend income.
Reducing Income With Tax Deductions
The amount of your income that’s actually taxable can be reduced by claiming tax deductions. For example, you can subtract the amount of a gift you made to a qualifying charity or nonprofit (up to $300, or $600 if are married filing jointly, and don’t itemize deductions).
This doesn’t mean your total tax bill is reduced by that amount, but rather that your taxable income is reduced by this much—which, in turn, may lower your effective tax rate.
You can’t always deduct all of what you spend. Some itemized deductions, such as for medical expenses and charitable giving, are limited to percentages of your adjusted gross income (AGI). For example, you could only claim an itemized deduction for charitable giving for up to 60% of your AGI through 2019, but the CARES Act has waived this rule for tax year 2020 and tax year 2021 in response to the coronavirus pandemic. The change in deduction was in effect until December 2021, which will impact the return you file in 2022.
Tax filers can itemize their deductions, but there’s also a standard deduction that often works out to more than the total of their itemized deductions for many filers. For the 2021 tax year, the standard deductions are:
- $25,100 for those who are married and file joint returns
- $12,550 for single taxpayers and those who are married but file separate returns
- $18,800 for taxpayers who qualify as heads of household
For the 2022 tax year, the standard deductions increase to:
- $25,900 for those who are married and file joint returns
- $12,950 for single taxpayers and those who are married but file separate returns
- $19,400 for taxpayers who qualify as heads of household
Reducing Taxes Owed With Credits
While tax deductions reduce your taxable income, tax credits come directly off what you owe the IRS—dollar for dollar. The Internal Revenue Code provides for several tax credits, from the child tax credit for each of your child dependents to the earned income tax credit, which is designed to provide refunds to low-income taxpayers and families with children.
Refundable tax credits can sometimes result if any balance is left over after reducing the tax you owe to zero.
For example, you might have owed the IRS $1,000 had you not claimed a $1,500 tax credit. The credit would erase your tax debt, and the IRS would send you a refund for the $500 balance if the credit were refundable. The IRS would keep that $500 if the credit you claimed was non-refundable, but at least it would entirely erase your tax debt.
Each credit comes with its own qualifying rules, and how you can claim it varies a little as well.
The American Rescue Plan Act of 2021 eliminates the minimum income requirement for the Child Tax Credit. It increases the maximum benefit to $3,600 for children under age six, and to $3,000 for children ages six through 17. The age-17 cap is one year older than the usual age for qualifying. This applies to your 2021 tax return that you file in 2022.
Some tax credits, such as the Additional Child Tax Credit, require their own forms that help you calculate how much you're entitled to and show the IRS how you arrived at that amount.
The qualifying rules for tax credits, particularly the earned income credit, can be complex, so consider checking with a tax professional to be absolutely sure you can claim them. But reputable tax preparation software can also be helpful, asking you a series of questions to determine whether you qualify.
Getting Your Refund (or Paying Your Tax Bill)
You’ll be able to determine your tax balance—whether you owe money or are owed a tax refund—after you’ve entered all the relevant information about your income, deductions, and tax credits.
You can send any money due to the IRS and your state’s department of revenue, or you can use one of the online payment options provided by the IRS. Direct Pay allows you to make a direct debit from your bank account payable to the IRS, and the agency accepts credit card payments online as well.
The IRS offers payment plans if it turns out that you owe more than you can pay all at once. You can apply for the payment plan online.
You have a few options for receiving your payment if you're owed a refund, including a mailed check or direct deposit into a bank account. You can even divide your refund into separate bank accounts or use it to purchase savings bonds from the Treasury Department.
Even if you have no income, it may be wise to file a tax return. And don't neglect to save a copy of your return for your records—it will come in handy when you’re doing your taxes next year or, especially, if the IRS has questions or decides to audit you.
Frequently Asked Questions (FAQs)
How much do you have to make to need to file taxes?
You can make up to your standard deduction level before you need to file taxes. A single filer under the age of 65 in 2021, for example, could earn up to $12,550 before they needed to file taxes in 2022. A married couple in the same situation could earn up to $25,100.
What happens if you don't file taxes?
If you don't owe anything, you may not need to file taxes. However, if you owe taxes and don't pay them by filing returns, then the IRS will try to collect the money in other ways like garnishing your wages. Even if you don't owe taxes, you won't be able to collect any refunds if you don't file, so it's almost always a good idea to file whether you "need" to or not.
How do you ask for an extension for filing taxes?
You can use Free File to request an extension online. Extensions for filing will be automatically approved, but if you owe taxes, you still need to pay your taxes by Tax Day. If you can't pay taxes on time, you need to establish a payment plan with the IRS.
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IRS. “Publication 509 Cat. No. 15013X Tax Calendars For Use in 2022,” Page 4.
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Internal Revenue Service. "Forms and Associated Taxes for Independent Contractors."
Internal Revenue Service. "Self-Employed Individuals Tax Center."
Internal Revenue Service. "About Form 1099-MISC, Miscellaneous Income."
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Internal Revenue Service. "Credits and Deductions for Individuals."
U.S. Congress. "H.R. 1319 - American Rescue Plan Act of 2021," Sec. 9611, Pages 141-142.
Internal Revenue Service. "Using Your Income Tax Refund to Save by Buying U.S. Savings Bonds."