Tax season is here! The 2025 filing period officially kicked off on January 27 and ends on April 15, with an extension deadline in October. Whether you’re a do-it-yourself tax filer or prefer to leave it to the pros, preparation and strategy are the keys to success.
New Tools to Make Filing Easier
The IRS is stepping up its game this year with tools designed to simplify tax filing. If you’ve been frustrated by long waits or outdated systems in the past, here’s some good news:
IRS Free File: This program partners with third-party software providers to offer free federal tax filing for individuals who earn under $73,000. The software guides you step-by-step through the process, making it easier to file confidently.
IRS Direct File: New for this year, this tool allows anyone—regardless of income—to file directly through the IRS. It’s a simpler option if you’re confident filling out forms without additional guidance or third-party software.
Both tools save you money but serve different levels of expertise. If you want step-by-step help, Free File is your go-to. If you prefer a no-frills option, Direct File is a solid choice.
Key Deadlines to Know
W-2 Forms: Employers must provide these by January 31. Don’t file until you have all your documentation.
Standard Filing Deadline: April 15 is the official due date. Miss it, and you could face penalties.
Extension Deadline: Need more time? File for an extension by April 15. That gives you until October to submit your return.
Standard Deduction vs. Itemizing
Before diving into your taxes, decide whether to claim the standard deduction or itemize deductions. Here’s the breakdown for 2025:
- Single Filers: $14,600
- Heads of Household: $21,900
- Married Filing Jointly: $29,200
Itemizing only makes sense if your deductions (like mortgage interest, medical expenses, or charitable donations) exceed these amounts. Otherwise, save yourself the hassle and stick with the standard deduction.
Business vs. Hobby: The IRS Rule
The IRS has clear rules for distinguishing a business from a hobby—and it matters because only businesses can deduct expenses.
Business: To qualify as a business, your activity must have a profit motive and be operated regularly with the intent to make money.
Hobby: If your activity consistently loses money and lacks a clear intent to generate profit, the IRS may classify it as a hobby. In this case, you cannot deduct expenses beyond the income the hobby generates.
For example, if you’re a football referee and earned $5,000 for the year but claimed $3,000 in expenses for uniforms, travel, and equipment, the IRS may raise questions. That’s a big deal because such a large deduction compared to your income could trigger scrutiny. To avoid this, ensure your business expenses are reasonable and customary for your industry and keep detailed records of every claim.
Big Business Deductions: What’s Allowed
The IRS allows you to deduct business expenses that are both reasonable (not excessive) and customary (typical for your industry).
For example, a freelance graphic designer earning $30,000 could reasonably claim expenses for software, advertising, and supplies, provided those costs align with industry norms. However, claiming $25,000 in deductions might raise a red flag unless fully documented and justified.
The key is to ensure every deduction is legitimate and backed by receipts. Keep detailed records to show the IRS that your claims are valid.
Get Your Refund Faster
Want your refund ASAP? Here’s the playbook:
E-File: Paper returns are outdated. File electronically for faster processing.
Direct Deposit: Skip the check and have your refund deposited directly into your bank account.
Track It: Use the “Where’s My Refund” tool on IRS.gov to see when your money will arrive. Most electronic filers get their refunds within 21 days.
Maximize Your Tax Refund
Your tax refund isn’t “free money”—it’s your money. Don’t waste it on unnecessary purchases or trust your special friend to flip it. Instead, use it to strengthen your financial future.
Pay Off Debt: High-interest credit card debt is a budget-killer. Use your refund to pay it off and free up cash for other goals.
Build an Emergency Fund: Aim for 3-6 months’ worth of expenses to cover life’s unexpected twists and turns.
Boost Retirement Savings: Time is money. The earlier you save, the more you’ll have later. Fund an IRA or increase your 401(k) contributions.
Save for Big Purchases: Thinking about buying a car or a house? Avoid financing with debt. Start saving now so you can pay cash later. The larger the down payment, the smaller the loan you have to borrow.
Invest in Yourself: Take a course, earn a certification, or build a skill that increases your earning potential.
Start Investing: Once your financial foundation is secure, open a brokerage account and invest in index funds or ETFs.
Bottom Line: Your refund is an opportunity to build financial stability. Don’t waste it.
Avoid IRS Audits
No one wants to deal with an audit. Here’s how to stay off the IRS radar:
Report All Income: This is non-negotiable. Failing to report even small amounts can raise a red flag.
High-Income Filers: If you make $100,000 or more, the IRS takes a closer look. Accuracy is critical.
Big Deductions: Claiming unusually high deductions for your income level may trigger an audit.
Business Use of Your Car: Claiming 100 percent business use without solid documentation is a big no-no. Keep detailed mileage logs.
Tax Credits: Improperly claiming credits like the Earned Income Tax Credit (EITC) is an audit magnet.
Play it Safe: File accurately, keep records, and avoid shortcuts. It’s far better than dealing with the IRS later.
The 2025 tax season doesn’t have to be stressful. With the right tools, strategies, and preparation, you can tackle your taxes with confidence—and maybe even come out ahead.
You know me as a personal finance columnist. I’m also a money coach and tax professional. If you’re in need of professional tax preparation services this year, hit me up.
(Damon Carr, Money Coach can be reached at 412-216-1013 or visit his website at www.damonmoneycoach.com)
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