How to file your taxes

Filing taxes is a daunting experience for many Americans, whether it's their first time or they've been doing it for decades.

The digital age has made filing a lot easier: You can often download your tax documents from your employer and financial institutions, for example, rather than wait for them to come in the mail.

But there's still a lot of complexity to the process, even if you're filing a simple return.

Here's what you need to know about how to file your taxes

Before you start filing, collect your tax forms so you aren't scrambling once you start the process. A comprehensive list of documents you'll need is available from the IRS, but here are the most pertinent ones:

• Your Social Security Number or tax ID number, along with your spouse's information, if applicable
• Any employment and/or investment income documents, such as a W2 or 1099
• Forms for deductions such as mortgage interest, student loan interest, charitable donations or education costs
• Your bank routing and account number to receive your refund by direct deposit

Errors when filing taxes can turn costly. Here are a few common mistakes to avoid:

• Choosing an incorrect filing status. Indicating your filing status is essential to filing your tax return. It has an impact on your tax bracket and the amount you'll pay in taxes, as well as the tax credits and deductions you can claim.
• Not having all the documents. You might want to rush and file your taxes early. After all, you want to get your tax refund sooner rather than later. But before you start, ensure that all organizations and institutions that might owe you a tax document have sent you one. Have all the paperwork ready before filing to avoid amending your tax return later.
• Not reporting all the information that has been sent to you. If you've received a tax document, the IRS has received it too. Enter all the information from such documents carefully so that everything matches the government's records. If something doesn't look right, bring it up to the document's sender and request a corrected form.
• Entering incorrect account numbers. Nobody wants to anxiously await a tax refund only to realize they have provided the wrong banking information. Remember to double-check your bank account and routing number if you're choosing direct deposit.
• Missing out on tax breaks. The IRS might not be known as the most generous institution, but there are plenty of tax credits and deductions available, especially for families and homeowners. Always check how much you can deduct when itemizing before opting for the standard deduction.
• Not filing at all. You might be tempted to skip filing if you can't afford your tax bill. However, that can lead to penalties and even tax evasion charges. Instead, file a return and enroll in an installment payment plan offered by the IRS.

Once you have the information and documents, choose from one of these secure options.

1. Use an online tax preparation service

If you don't qualify for the IRS Free File program or have more complicated filing needs, you may consider using a tax software service. Some offer free options for simple tax returns, but may not come with needed tax guidance to help you through the process.

Each service ranges in features and price as each person's tax filing needs can be vastly different. For example, TurboTax's free edition offers a free service designed for first-time filers or simple returns. In terms of paid options, it offers a deluxe service for HSA contributions and itemizing deductions, a premium service geared towards real estate investors and a self-employment service for gig workers and contractors. However, each paid service had additional costs for each state tax filing. (~37% of taxpayers qualify. Form 1040 + limited credits only.)

So before you select a tax software service, it's important to choose one that serves your needs based on your tax situation. Here are some of CNBC Select's favorite online tax-prep services:

2. Consult a tax professional in your area

If hiring a tax professional is your preference, you'll need to do this quickly. As the tax deadline is quickly approaching, CPA's are becoming booked up with appointments to see their current clients.

But before you book an appointment, consider the cost of hiring a CPA. According to the National Society of Accountants, a 1040 tax filing with no itemizations cost an average of $220. With itemizations, the cost jumps to $323. But if you had any 'life events' occur last year such as getting married, having children or purchasing or selling a home, it may be beneficial to hire a CPA to help you create a tax strategy that works in your favor.

However, before you choose a CPA, ensure you understand their cost to file your taxes, as well as if they're the best fit for your tax needs. If you have a unique tax situation, such as being in the military or if you're a multi-property real estate investor, you may want to search for a CPA with experience handling similar situations.

Additionally, you may want to check the status of their certification by searching their name or practice on your respective state's CPA registry. And to finalize your decision, consider checking review sites like Yelp or Google Reviews to see if other people have been satisfied with their tax filing experience.

Hiring a CPA is likely the most expensive solution to filing your taxes, but having a professional on your side that understands taxes well can take a huge hassle off your plate — and could even possibly result in a larger tax return.

3. Use IRS Direct File

In 2023, the IRS launched its Direct File pilot program, a free way to file a federal tax return online. Currently, the program is open to qualified taxpayers in 25 states.

To be eligible, you must be a W-2 employee, receive Social Security or unemployment insurance or have investment income of less than $1,500.

You must also have a Social Security number or Individual Taxpayer Identification Number and a valid state ID or passport.

You can use Direct File to claim the Earned Income Tax Credit and Child Tax Credit, but not other credits. The program doesn't allow you to itemize deductions or report additional income, like capital gains or money from gig work or rental properties.

4. File with Free File

The IRS Free File program allows qualified taxpayers to prepare and file their federal tax returns online for free. The program is available to individuals who meet certain income requirements: For 2024, Free File is available to taxpayers whose adjusted gross income was less than $79,000 in 2023.

Free File is a partnership between the IRS and top tax software companies, each of which offer free filing for different tax situations and income levels. Check this list and see which meets your needs.

• What to avoid when filing taxes?

Tax season is a ripe time for fraudsters, but if you file securely, you'll lessen the risk of your information being stolen and ensure your return is processed correctly.

By filing online, rather than sending your return through the mail, you'll also minimize the time it takes to get a refund that you can use to pay down debt, save for a home or invest for retirement.

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