We’re out of the January doldrums, which means tax season is upon us. So when can I start filing? The IRS is already accepting returns as of January 29. And it's never a bad idea to file early – the earlier you do it, the earlier you might get your tax refund. The IRS is bracing for more than 146 million individual tax returns this year.

When should you file? (00:00:29)

The deadline to file is Monday April 15. And for most Americans, April 15 is also the absolute last day to request an extension.

Remember, an extension buys you additional time to file, but not more time to pay. It could help you avoid a potentially hefty penalty. Even if you get a six month extension, you still need to submit an estimated payment by tax day.

A tax extension can also push back contribution deadlines for some small business retirement plans, solo entrepreneurs, or even freelancers. Importantly, you get an automatic extension if you were hit by a natural disaster, are a member of the military that qualifies, or you worked or lived outside the U.S. on the tax filing deadline.

What if you miss the tax deadline? (00:01:16)

You’ll pay for it a couple of different ways. First there’s ‘failure to file’ if you don't file your tax return by the due date. The 'failure to file' penalty is 5% of the unpaid taxes for each month, or part of a month, that a tax return is late.

Then there’s ‘failure to pay.’ This applies when you don't pay the tax you owe by the due date. The 'failure to pay' penalty is 0.5% of the unpaid taxes for each month, or part of a month, the tax remains unpaid.

What else should you consider? (00:01:32)

Your deductions – that’s what you can subtract from your taxable income. You can opt for a standard deduction or an itemized one, but you need to be able to do some math to figure out which one makes sense for you.

The ‘standard deduction’ is a pre-ordained subtraction you can make when you file – it’s adjusted each year for inflation. The standard deduction for tax returns filed in 2024 is $13,850 for single filers, $27,700 for joint filers, or $20,800 for heads of household.

Itemizing is more work, but it can be worth it – especially if you want to include things like medical expenses or charitable donations.

Credits are also critical, with Child Care Credits chief among them. You’re eligible for the full credit for each qualifying child if your annual income is not over $200,000, or $400,000 in a joint filing. That’s as long as you meet all the other eligibility requirements.

Don’t forget the Earned Income Tax Credit for workers with low to moderate income, and the Lifetime Learning Credit for those still in school.

There certainly are a lot of credits, but stay on top of it. In 2022, the IRS sent letters to over 9 million families potentially eligible for these credits – and many others – that did not claim them.

What else do you need to know? (00:02:49)

Recent legislation also plays a role here, maybe bigger than you realize. The Inflation Reduction Act could impact your tax bill. If you’ve been making your home more energy efficient, or you’ve finally bought that Tesla you always dreamed of – it could save you money on your taxes.

Remember, unlike a deduction, a credit cuts your tax bill directly. So take the time to figure out what you can claim.

There is a lot to think about in the coming months, and Yahoo Finance will be with you every step of the way.

Video Transcript

[MUSIC PLAYING]

SEANA SMITH: We are out of the January doldrums, which can only mean one thing-- tax season is upon us. And first things first, when can I start filing? Well, the IRS is already accepting returns.

The first day was January 29. And it's never a bad idea to file early. The earlier you do it, the earlier you might get your tax refund. Now the IRS is bracing for more than 146 million individual tax returns. Yes, that is a lot of forms. So when should you file? Well, the deadline to file is Monday, April 15. And for most Americans, well, April 15 is also the absolute last day to request an extension.

So no stress, you can just ask for an extension, right? Well, yes and no. Remember, an extension buys you additional time to file but not more time to pay. But it could help you avoid a potentially hefty penalty. Even if you get a six-month extension, you still need to submit any outstanding payments by tax day. Now a tax extension can also push back contribution deadlines for some small business retirement plans, solo entrepreneurs, or, heck, even freelancers.

Importantly, you can get an automatic extension if you are hit by a natural disaster, or a member of the military that qualifies, or if you worked or lived outside of the US on tax filing deadlines. So what happens if you just miss the tax deadline? Well you will pay for it a couple of different ways. First, there's failure to file if you don't file your tax returns by the due date. Then there's also failure to pay, and this applies when you don't pay the tax that you owe by that due date.

So what else should you consider? Your deductions. That's what you can subtract from your taxable income. You can opt for a standard deduction or an itemized one. But you need to be able to do some math to figure out which one makes the most sense for you.

The standard deduction is a preordained subtraction that you can make when you file. It's adjusted each year for inflation. The standard deduction for tax returns filed in 2024 is $13,850 for single filers, $27,700 for joint filers, and $20,800 for heads of household. Itemizing, it is more work, but it can be worth it, especially if you want to include things like medical expenses or charitable donations.

Credits are also critical, with the child care tax credit chief among them. You are eligible for the full credit for each qualifying child if your annual income is not over $200,000 or $400,000 in a joint filing. That is as long as you meet all the other eligibility requirements. Don't forget the earned income tax credit for workers with low to moderate income and the lifetime learning credit for those that are still in school. There certainly are lots, but stay on top of it. In 2022, the IRS sent letters to over 9 million families potentially eligible for these credits and many others that did not claim them.

So what else do you need to know? Well, recent legislation also plays a key role, maybe bigger than you realize. The Inflation Reduction Act could impact your tax bill. If you've been making your home more energy-efficient or you finally bought that Tesla that you've always dreamed of, well, it could actually save you money on your taxes.

And remember, unlike a deduction, a credit cuts your tax bill directly. So take the time to figure out what you can claim. There's lots to think about in the coming months. And Yahoo Finance will be with you every step of the way.