When Someone Says They Need to File Their Taxes, What Do They Mean?

Tax season is an annual occurrence that brings paperwork and deadlines for individuals and businesses. At the core of this process is filing taxes, which ensures compliance with government regulations and contributes to public funding.

The Phrase “File Your Taxes”

“File your taxes” refers to submitting a tax return to the government, typically the Internal Revenue Service (IRS) in the United States. This submission declares an individual’s or entity’s income, expenses, and other financial details for a specific tax year. The goal is to determine the tax owed or refund due, based on financial activities and applicable laws.

Filing taxes requires more than completing forms; it involves understanding current tax codes. For instance, the Tax Cuts and Jobs Act of 2017 introduced changes like a higher standard deduction and the removal of personal exemptions. Taxpayers must stay informed about such updates to report their financial information correctly. Additionally, the IRS adjusts tax brackets annually for inflation, impacting tax liability.

Key documents like W-2 forms for employees or 1099 forms for contractors are necessary for reporting income and withheld taxes. Taxpayers must also include details on deductions and credits, such as mortgage interest or education expenses, which can reduce taxable income.

Types of Tax Return Forms

Choosing the correct tax form depends on the taxpayer’s financial situation and income sources. The IRS offers forms tailored to various needs.

Individual Income Forms

Most individuals use Form 1040, U.S. Individual Income Tax Return, to report income such as wages, dividends, and capital gains. This form also allows for itemized deductions and tax credits, which can significantly affect tax liability. Taxpayers must decide between itemizing deductions or taking the standard deduction, as this choice impacts the amount owed. Filing status—such as single, married filing jointly, or head of household—also influences tax brackets and standard deductions.

Self-Employment Forms

Self-employed individuals, including freelancers and contractors, face additional tax responsibilities. They use Schedule C, Profit or Loss from Business, attached to Form 1040, to report business income and expenses. They must also pay self-employment tax, covering Social Security and Medicare contributions, using Schedule SE. The self-employment tax rate is 15.3%, with 12.4% for Social Security and 2.9% for Medicare. Accurate records of business expenses, such as office supplies and travel, are essential for minimizing tax liability. Additionally, self-employed taxpayers often need to make estimated quarterly tax payments to avoid penalties.

Other Specialized Forms

The IRS provides forms for specific tax situations. For example, corporations use Form 1120 to report income and deductions, while partnerships file Form 1065. Trusts and estates report income distributed to beneficiaries using Form 1041. Taxpayers with foreign income or assets may need Form 2555, Foreign Earned Income, or Form 8938, Statement of Specified Foreign Financial Assets, to comply with reporting requirements. Each form has unique thresholds, such as the $10,000 reporting limit for foreign accounts under the Bank Secrecy Act.

Key Deadlines and Extensions

Navigating deadlines is essential for tax compliance. For individual taxpayers, the federal income tax return deadline is April 15th, or the next business day if it falls on a weekend or holiday. Missing this deadline can result in penalties, including a failure-to-file penalty of 5% of unpaid taxes per month, up to 25%.

Businesses have different deadlines based on their structure. Corporations must file by March 15th, while partnerships and S-corporations also have a March 15th deadline for forms like 1065 and 1120S. Taxpayers who need more time can request a six-month extension using Form 4868, moving the deadline to October 15th. However, an extension to file does not extend the deadline to pay; taxes must still be paid by the original due date to avoid penalties.

In special circumstances, such as natural disasters or military service in combat zones, the IRS may offer additional relief. Taxpayers in FEMA-declared disaster areas may receive automatic extensions. Members of the military serving in combat zones are granted at least 180 extra days after leaving the zone to file and pay taxes.

Consequences of Not Filing

Failing to file a tax return can result in financial and legal consequences. The failure-to-file penalty, more severe than the failure-to-pay penalty, begins accruing immediately after the deadline. Interest on unpaid taxes compounds daily, increasing the amount owed.

The IRS may also take enforcement actions, such as issuing a Notice of Deficiency to formally assess taxes owed. This can lead to a tax lien, which impacts creditworthiness and makes obtaining loans difficult. In severe cases, the IRS may initiate levies, seizing assets to settle debts.