5 Things To Know Before Filing Your Taxes for the First Time

Becoming an adult is so great. You get to save to buy your first home. You stress out over finding your life partner. You get to work full time (if not more) hours. And you get to pay taxes. Yay! Oh, wait. Okay, okay, so maybe getting to the adult stage isn’t the best thing ever but we can at least help with the taxes part.

A couple prepare their tax returns

If you know what you’re doing, it can be a surprisingly painless process. Read on for five things to keep in mind before you file taxes for the first time.

Learn What Your Federal Income Tax Status Is

What you might not realize is that not everyone has to file a federal income tax return. As this Forbes article notes, “For most taxpayers, the quick ‘cheat sheet’ formula is this: find your standard deduction and add your personal exemption to that number.

For the 2016 tax year, the magic number is $10,350 for single taxpayers under the age of 65.” Check the IRS’s website for the current year’s “magic number”.

Take Advantage of Tax Credits

You’ve surely heard about tax deductions, but tax credits can be even more financially beneficial. They reduce your taxes due as opposed to just reducing taxable income. One of those credits is the American Opportunity Credit.

AOC allows anyone who is still in school to claim up to $2,500 on things like tuition and fees. Another one is EITC, or the Earned Income Tax Credit, which allows for students who are working to claim up to $506 for those with no qualifying children and up to $6,269 for those with three or more qualifying children.

Woman calculates how much tax she owes

Make Sure You Have All Your Tax Forms

If you haven’t gotten the W-2s from each of your employers from the past year because you’ve moved or they’ve gotten lost in the mail, you need to reach out to these employers to have them sent again. You also need to choose the tax form you’re going to use for filing. You most likely qualify to use a 1040EZ federal form.

This means that you are filing as single or married with no dependents, won’t be itemizing deductions, and your income is made up of only salaries, wages, and tips. Consult the IRS website to find out which form is most applicable, or go ahead and file with the more generic 1040.

File in Time

Tax Day falls right around April 17 each year, so be aware of this date. Having this on your radar will help you stay more organized with receipts for deductions, your filing forms, and more. If you or your tax professional realized you will end up paying as opposed to getting a return, you still need to file.

Payment arrangements can be made but penalties will be applied in any case where taxes weren’t filed. If Tax Day is coming in hot and you see the writing on the wall as far as taxes not being done on time, make sure to file for an extension. Keep in mind, though, this extension is for filing—any money owed will still be due by Tax Day.

Decide on E-Filing Vs. Hiring a Tax Preparer

If you are completely overwhelmed by the idea of doing your own taxes and have the financial means, hand your W2s and any other pertinent documents to your tax preparer. Because you are likely just starting out, though, your taxes will likely be easy and uncomplicated and, thus, not hard to do via e-filing.

Two business people talking

Without having itemized deductions and dependents, a simple tax filing software should walk you easily through the steps, especially if you already use an online budgeting software site like Budget Tracker.

If you do decide to outsource, remember that the most expensive accountants or tax preparers aren’t always necessarily the best for you. This is particularly true when taxes are straightforward, such as yours likely are. Find certified companies with a history of reputable service, like Community Tax. What began as a Chicago accounting firm is now a full-service tax company that handles tax issues for individuals and businesses alike.

Whether you hire a chain tax preparation company like this, or use a local business, just be sure to read testimonials, do your homework, and hire the right person for the job – your financial future depends on it.

Filing your taxes shouldn’t have to be a stressful experience, even if this is the first time you’ll be doing so. Do your research, get your documents and software in order, and enter adulthood. It’s time.

Add Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.