Why You Still Have to File Income Tax Return Every Year (And How to Actually Do It Right)

Tax season is basically that one uninvited guest who shows up on your doorstep every single spring. You know they're coming. You dread the knock. Yet, somehow, most of us still find ourselves scrambling to find that one specific 1099 form or a crumpled receipt for a donation made eight months ago. Honestly, the whole process of needing to file income tax return paperwork feels like a relic of a pre-digital age, but here we are.

It's a chore. It’s confusing.

The Internal Revenue Service (IRS) reported that for the 2024 filing season, they processed over 140 million individual returns. That is a massive amount of data. If you’re sitting there wondering why the government doesn't just send you a bill—since they already have your W-2 information from your employer—you aren't alone. Countries like the UK or Japan often do exactly that. But in the US, the burden is on you. If you miss a deadline or botch a number, the penalties aren't just annoying; they're expensive.

The Reality of Who Actually Needs to File

Not everyone has to jump through these hoops. If you’re a single person under 65 and you made less than $14,600 in 2024 (the standard deduction for the 2024 tax year), you might technically be off the hook. But "technically" is a dangerous word in the world of finance.

If you had federal income tax withheld from your paycheck, the only way to get that money back is to file income tax return forms. You're basically giving the government a free loan if you don't file. Then there’s the Earned Income Tax Credit (EITC). This is a huge deal for lower-to-moderate-income working individuals and families. According to the Center on Budget and Policy Priorities, the EITC lifted about 5.6 million people out of poverty in a single recent year. If you don't file, you don't get that credit. You're leaving money on the table.

Side Hustles and the Self-Employed Trap

The "gig economy" changed the rules for a lot of people.

Maybe you drive for Uber on weekends. Or you sell vintage lamps on Etsy. If you earned more than $400 from self-employment, you have to file. Period. This is where people get tripped up because they think, "Oh, it's just a hobby." The IRS doesn't care if you call it a hobby if it’s generating hundreds of dollars. You’ll likely need to fill out a Schedule C. It’s more work, but it also allows you to deduct expenses like home office space or part of your phone bill. Just keep your receipts. Seriously. A shoebox is better than nothing, but a digital folder is better for your sanity.

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Common Blunders That Trigger Audits

Nobody wants a letter from the IRS. It’s the adult version of being sent to the principal’s office. Most audits aren't actually "Man in a suit comes to your house and looks through your trash" scenarios. They are usually "correspondence audits" where a computer noticed a math error.

Typos are the biggest culprit.

If you mistype your Social Security number or your bank's routing number, your refund is going to vanish into a black hole for months. Another big one is the "matching" game. The IRS gets a copy of every 1099 and W-2 you receive. If you report $45,000 in income but their records show $52,000 because you forgot about a small freelance gig, their system flags it immediately. It’s automated. It’s fast. And it’s a headache to fix.

Then there’s the "Home Office Deduction" myth. People think it’s a red flag. It’s not necessarily a red flag if you actually have a dedicated space for work. But if you try to claim your kitchen table while your kids are eating cereal there, that’s where the trouble starts. The space must be used exclusively for business.

The Paperwork You Actually Need

Before you sit down at your computer, get your "tax life" in order. You’ll need the basics:

• Your SSN and the SSNs of any dependents.
• W-2 forms from every employer you had during the year.
• 1099-NEC or 1099-K forms if you did contract work.
• 1099-INT for interest earned on your savings account (even if it’s just $10).
• Records of any digital asset transactions (yes, the IRS is very interested in your Crypto moves now).

If you’re itemizing—which most people don't do anymore because the standard deduction is so high—you need much more. Mortgage interest statements (Form 1098), property tax records, and medical bills that exceed 7.5% of your adjusted gross income. For most of us, the standard deduction is the way to go. It’s simpler. It’s faster.

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Digital Filing vs. The Old School Way

Does anyone actually mail a paper return anymore? Roughly 90% of individual returns are now filed electronically. It’s just better. The software catches basic math errors and you get your refund in about 21 days compared to six weeks or longer for paper.

If your income is below $79,000, you should use the IRS Free File program. It’s a partnership between the IRS and brand-name tax software companies. They try to hide it sometimes behind paid ads, but it’s there. You shouldn't have to pay to file income tax return documents if your income is in that range. For those with more complex situations, like owning multiple rental properties or having international investments, hiring a CPA (Certified Public Accountant) is worth the $300-$600 they might charge. They see the things you miss.

Extensions: The "I Need More Time" Button

If April 15th is breathing down your neck and you don't have your documents, file for an extension. It gives you until October 15th.

But—and this is a huge "but"—an extension to file is not an extension to pay.

If you owe money, you still have to send a check by April 15th based on an estimate of what you think you owe. If you don't, the IRS starts charging interest and "failure to pay" penalties. It’s a common misconception that an extension buys you six months of interest-free debt. It doesn't. It just stops the "failure to file" penalty, which is actually much higher than the "failure to pay" penalty.

Crypto, NFTs, and the New Tax Frontier

The IRS added a specific question to the top of Form 1040 about digital assets. They aren't messing around. If you sold Bitcoin, traded an NFT, or used Ethereum to buy something, that is a taxable event. You have to calculate the capital gain or loss based on the value when you acquired it versus the value when you sold it.

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Tax software has gotten better at importing this data from exchanges like Coinbase or Kraken, but it’s still messy. If you did a lot of "swaps" between different coins, you might have hundreds of micro-transactions. Each one is a line item. It’s tedious, but ignoring it is a recipe for a future tax bill with a lot of zeros at the end.

Real Talk About Refunds

We all love a big refund. It feels like a bonus. But realistically, a big refund just means you've been overpaying your taxes all year. You basically gave the government an interest-free loan.

If you got a $3,000 refund, that’s $250 a month that could have been in your paycheck, helping you pay rent or investing in your 401(k). You can adjust this by changing your withholdings on your W-4 form at work. Most people prefer the "forced savings" aspect of a refund, and that’s fine. Just know that you have control over that number.

Steps to Take Right Now

Don't wait until April 14th. The stress isn't worth it.

1. Create an "IRS Online Account." This is a literal lifesaver. You can see your past transcripts, see what the IRS thinks you owe, and verify your identity. It makes the actual filing process much smoother.
2. Check your mail for 1099s. They usually arrive in late January or early February. If one looks wrong, call the company immediately to get it corrected before they send the data to the IRS.
3. Decide on your "how." Are you going to use Free File? TurboTax? A local accountant? Make that decision today so you aren't panic-buying software at midnight on the deadline.
4. Organize your digital files. Create a folder on your desktop labeled "Taxes 2024" and drop every PDF of a receipt or form in there as it arrives.

Filing your taxes is never going to be "fun." It’s a complex, somewhat archaic system that requires a bit of patience. But if you break it down into smaller tasks—gathering forms one week, choosing software the next—it becomes a lot less daunting. Just remember that accuracy beats speed every single time. Double-check your bank account numbers and your SSN. Those tiny errors are what cause 90% of the delays. Once you hit that "submit" button and get the confirmation email, you can breathe easy for another 364 days.