Everything You Need to Know About Tax Season

We've got Cleo's resident financial advisor, Anna, to answer some of your most-searched questions around tax season.

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Anna Yen, CFA, is a financial wellness expert with 2 decades of experience in financial markets.  This includes on the trading floors of JPMorgan and as a Director at UBS. She specializes in personal finance, derivatives, and alternative investments including crypto.

Tax season is here! 

(Or, if you’re reading this after April, there’s no better time to start preparing for next year) 

Either way, keeping tabs on your tax situation is essential for your financial health. 

Whether you’re self-employed or a W-2 employee, here’s what you should know about tax season, from when to file to what happens if you don’t. 

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What is tax season?

Tax season is a roughly three-month chunk of the year when income earners prepare and file taxes. During tax season, you:

• Gather or receive any tax-related documents (like your W-2 or 1099)
• Track down any receipts for planned deductions
• Prepare your financial statements for filing
• And finally, fill out your return

Note that when you file taxes, you’re filing for the previous year – so in 2023, you file for 2022. By waiting until after the new year, you’ll be able to consider all income and deductions from the prior year.  

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When does tax season start?

If you’re like most of us, you’re probably not itching to find out when tax season is – unless the IRS owes you a fat refund.  

But you’ll want to know when you can get your filing out of the way. And you have good reason to be curious: while the IRS declares an official tax season every year, the dates themselves vary. (Though it usually spans from the end of January until mid-April.) 

In 2023, the IRS began accepting tax forms for the 2022 tax year on Monday, January 23. The 2023 tax season will officially end on Tuesday, April 18. 

Though the IRS will still process tax returns after April 18, filing late may result in late penalties and interest charges unless you get an extension. 

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When can I file my taxes?

You can file your taxes anywhere in the IRS’ officially-declared tax season. (January 23-April 18 in 2023.) Generally, it’s wise to file ASAP to ensure you get your refund quickly. Preparing early also gives you a chance to pay off any remaining tax balance you owe before April 18. 

That said, not everyone can file when tax season opens. For instance, if you have an investment account, you may not receive your required tax documents until around mid-February. It’s important to wait for these documents to file; otherwise, you risk turning in an inaccurate return. 

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How much do you have to make to file taxes?

Most of the time, anyone who brings in more than the standard deduction ($12,950 in 2023) should file taxes. If your employer has been withholding more taxes than you owe, you might be due a tax refund.  

For self-employed individuals like freelancers or independent contractors, the filing threshold is even lower. The IRS requires anyone who makes $400 or more (after business expenses) from self-employment activities to file taxes.  

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What documents do I need to file taxes?

The exact documents you’ll need to file taxes vary by financial situation. (For instance, if you have a retirement or brokerage investment account, you’ll need more documents than someone without one.) 

In general, expect to need:

• Personal identification like your Social Security Number
• Forms showing income from:

• Employee work (W-2)
• Contract work, unemployment benefits, investment earnings, and/or interest earnings (various 1099 forms, including the 1099-NEC)
• Rental earnings (1099-MISC)
• Retirement distributions (1099-R)

• Records of any business expenses
• Proof of any estimated tax payments made (usually for self-employed individuals)
• Proof of interest paid on a mortgage or student loan (1098) 

You’ll also need proof of any tax-deductible personal expenses like medical bills or insurance premiums, retirement contributions, and certain educational expenses. And of course, if you run a business, you’ll need receipts for purchases you plan to claim. 

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What happens if you don’t file taxes?

Everyone’s thinking it – there’s no shame in asking. But what you shouldn’t do is try to avoid filing taxes, especially if you owe money to the IRS. 

According to the IRS, not filing by the due date can result in a Failure to File Penalty. On top of paying any taxes owed, the IRS will slap you with a penalty up to 25% of the unfiled taxes. (They may even tack on interest charges for good measure.)  

Bear in mind that if you’re due a refund, or if you earned under the standard deduction, there’s no penalty to file. But if you don’t file a return within 3 years, you’ll lose your chance to claim that refund – permanently. (In other words, if you suspect you’ll have a refund, you should file…or lose your money forever.) 

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How to file for an extension on taxes

An extension only applies to filing the annual return and usually does not give you more time to pay – your taxes are still due by mid-April. 

But if you need more time to finish your paperwork, filing for an extension gives you until October 15 to finish your tax return. 

Note that you may have to pay any back taxes owed or set up a payment plan for them before the IRS will grant your extension request. 

The IRS sometimes postpones deadlines to provide tax relief in disaster situations. For the 2022 tax year, taxpayers in parts of Alabama, Georgia, and most of California qualify for an automatic filing and payment extension until October 16, 2023.  

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What is tax fraud?

Tax fraud occurs when filers “willfully” and intentionally falsify information on their tax documents to reduce their tax bill. (In other words, lying to the government to weasel out of taxes.) Examples of tax fraud include:

• Using a fake Social Security number 
• Not reporting your income
• Claiming personal expenses as business deductions

Tax evasion – illegally avoiding paying your taxes – is often used as an example of tax fraud. 

Tax fraud can lead to both civil (financial) and criminal penalties, including fees and/or prison time. 

However, if you make an honest mistake or have gaps in recordkeeping, you may face just a fine. 

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How to do taxes as a W-2 employee

As a W-2 employee, your employer likely pulls taxes from each paycheck for you, which simplifies tax season. At the end of the year, you’ll receive a W-2 form that you can use to complete your taxes. 

One option is to use IRS Fillable Forms – essentially, the modern version of a DIY pen-and-paper form. 

If you prefer more assistance, the IRS Free File program allows anyone earning under $73,000 to file with an online tax preparation service for free. 

But if you earn over $73,000 or have a more complicated tax situation, you may want to consult a tax professional. Complexities may include multiple income sources, investments, or a recent marriage/divorce. 

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How to do taxes as a freelancer

Freelancers often have more complex tax situations than W-2 employees. First off, you have to file if you have net self-employment earnings of $400 in a year. Net earnings is your business income minus expenses, and you should be prepared to show proof of it if asked.

Since many free file options don’t support the extra forms freelancers may need to file a return, you may have to pay a tax professional. Another option is to use a tax program like TurboTax, H&R Block, TaxSlayer, or Jackson Hewitt. 

Of course, you can also use the IRS Fillable Forms. But doing so means you’re on your own – no matter how complicated things get.  

If you don’t have an employer withholding taxes for you, then you may have to make quarterly payments (the last quarter ends mid-April). You can use Form 1040-ES to estimate the required payments.

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Keep Tax Work Simple

Tax season might not be a favorite time of the year – even if your finances are relatively simple. The earlier you file your taxes, the earlier you get that refund (if you’re owed one). You can check for refunds within 24 hours after e-filing on Where’s My Refund.

The easiest way to address tax season woes is by preparing year-round. Track your income and expenses –made easy with Cleo! – watch your tax withholdings or estimated payments, and keep your documents well-organized. 

Then, when tax season rolls around, you can tackle every question head-on. (And/or have the money for a tax professional stashed away ahead of time.) You’ve got it handled – grab your favorite snacks, put on some music, and celebrate when it’s over.

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Big love. Cleo 💙