How to Do Taxes on Your Own: Your Complete Guide

You’ll need to consider tax deductions and credits as well when looking to lower your taxable income.

How to Do Taxes on Your Own

Why Do I Have to File a Return?

You have to file a tax return because you’re probably a taxpayer. The IRS considers taxable income as all income from whatever source derived, including gains realized, unless otherwise excluded.

How to File a Tax Return on Your Own

To prepare your taxes on your own, you’ll need to assemble the correct paperwork. That includes all of those forms that have been coming in from various sources: – Form W-2: Wage and Tax Statement – Form 1099-NEC: Nonemployee Compensation – Form 1099-MISC: Miscellaneous Income – Form 8949: Sales and Other Disposition Assets – Form 1120: U.S. Corporate Income Tax Return

How Income Tax Brackets Work

When you’ve calculated your total gross income, you can then subtract the relevant tax deductions and credits to your situation to reduce your gross income to your adjusted gross income and, finally, taxable income. From here, you then figure out how much taxes you owe based on the progressive set of seven income tax brackets used by the IRS.

How to Reduce Your Taxable Income

Aside from having certain types of income, the IRS awards better taxation preferences.  You have two levers to lower your taxable income: tax deductions and tax credits. Tax deductions work by reducing your taxable income on a dollar-for-dollar basis.

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