What does "filing taxes" involve?

Filing taxes involves the process of reporting income earned during the tax year and calculating the taxes owed to the government based on that income. This typically includes gathering all relevant financial information, such as W-2 forms for wages and 1099 forms for interest, dividends, or freelance income. Taxpayers must then determine their filing status, apply appropriate tax rates, and consider any deductions or credits they may qualify for, which ultimately affects the total tax liability. This ensures compliance with tax laws and helps individuals fulfill their responsibilities as citizens by contributing to public services and infrastructure.

The other options focus on different aspects of personal finance that do not directly relate to the tax filing process. For example, investing money for profit pertains to wealth accumulation, creating a budget involves planning and managing expenses, and obtaining loans is about borrowing funds for various needs. Each of these activities plays a role in overall financial health but does not encompass the specific requirements and actions associated with filing taxes.