Filing your income tax returns may sound frightening, but it is not as bad as it may sound. It is something that everyone has been doing since 1913, and it is something you will be doing for the rest of your life. You may decide to use a professional to prepare your return or prepare it yourself with or without the help of income tax software like TurboTax or TaxCut. In any case, there are some things you should know to make the whole process easier.

The Basics

How do income taxes work? The income tax laws are quite complex, but they generally boil down to a few fundamentals:

  • Income subject to tax includes wages, investment income (dividends, interest, and capital gains), distributions from retirement plans, self-employment income, income from partnerships and Sub-Chapter S corporations and a few other items.
  • Then, that income is reduced for certain adjustments. Most people have few of these other than deductible IRA contributions and certain tuition and educational expenses.
  • You then get deductions for itemized expenses like state and local taxes paid, mortgage interest, charitable contributions, and a few other less common items. If you do not have a lot of these itemized deductions, you are allowed to take a standard deduction. For 2019, the standard deduction for single filers is $12,200 and $24,400 for married couples filing a joint return.
  • The net of these three items is your taxable income.

Once you have your taxable income calculated, you then apply different tax rates against brackets of your income. There are different rates for single individuals and married couples filing joint returns. Think of this like a stair step – income in your lowest brackets is taxed at the lowest rates and as you climb the stairs, your taxable income gets taxed at higher rates.

Income Tax Rate Schedules for 2019
2019 Single Return Rate Schedule 2019 Married Filing Jointly Rate Schedule
Taxable income levels Tax rate Taxable income levels Tax rate
0 to $9,700 10% 0 to $19,400 10%
$9,701 to $39,475 12% $19,401 to $78,950 12%
$39,476 to $84,200 22% $78,951 to $168,400 22%
$84,201 to $160,725 24% $168,401 to $321,450 24%
$160,726 to $204,100 32% $321,451 to $408,200 32%
$204,101 to $510,300 35% $408,201 to $612,350 35%
Over $510,300 37% Over $612,350 37%

Long term capital gains and qualifying dividends receive favorable tax treatment, based on taxable income levels.

2019 Taxation of Dividends and Long Term Capital Gains
Tax rate on long term capital gains and qualifying dividends Taxable income levels for those filing individual returns Taxable income levels for those filing joint returns
0% Under $39,375 Under $78,750
15% $39,376 to $434,550 $78,751 to $488,850
20% Over $434,550 Over $488,850

Then you determine if you owe money with your return or if you have a refund coming. Your employer withholds income taxes from each paycheck. You simply compare what has already been withheld with your calculated tax liability. Generally, unless you have a lot of non-wage income or a complicated tax situation, you will have a small refund or owe a small amount. If your refund is large or if you owe quite a bit, you should consider changing how much you are having withheld.

Information you will need

For most people starting out and not using itemized deductions, the information you will need is simple – your employer will send you a Form W-2 for your wages and your financial institutions will send you Form 1099s with information on your dividends, interest and other investment income.

If you are itemizing your deductions because you have deductions larger than the standard deduction amounts, you will need information documenting those expenses. Your W-2 will have information on state and local income taxes withheld, you will get a statement from your mortgage lender with mortgage interest information and you will need canceled checks or other receipts for other deductions.

When to file

Your income tax return is due on April 15th of the following year. For example, your 2019 return is due on April 15, 2020. You can file earlier if you wish. You should get your W-2 by the end of January and your 1099 forms shortly thereafter.

You can also file an application for extension of time to file your return, but most people do not do this unless they absolutely need to. In addition, getting an extension does not remove the requirement of paying any amount due beyond April 15th.

What IRS form(s) you will need

If you are not using itemized deductions, you can probably use IRS form 1040 EZ. Otherwise, you will probably need several forms – 1040, Schedules A & B and Schedule D. These forms are available online at and you can usually find them at public libraries and post offices.

You may also want to consider using income tax software to prepare your return. There are several programs available including TurboTax, TaxCut and others. These programs make the process easier by stepping you through an interview and printing the forms. They also can enable you to file your return electronically. The IRS website also may have simple software available.

What to keep and for how long?

Most of the advice here is relatively simple. You should keep copies of your actual returns forever and you must keep the documents to support anything on your return for three years following the due date of the return.

Where it gets complicated is usually with investments and homeownership. You need to be able to document what you paid for a stock for three years past the due date of the return reflecting the sale of the stock. Most brokerage firms provide a year-end statement that shows this information, so it is a good idea to keep year-end statements. Record retention for homeownership involves keeping records of what you paid for your home and the cost of any improvements you make.

Final Words

Everyone’s tax situation is different. This article presents only some of the basic information you may find helpful. If your situation is complicated or if you do not feel comfortable with any part of preparing your return, find and use the services of a qualified tax professional.