You’ve probably heard people complain about having to file their taxes. Perhaps you’re a bit intimidated as a result. With tax season now upon us, the time has come for you to file your very first tax return.
Filing your taxes probably isn’t as bad as you think. Most first time tax filers just need to learn a few tax filing basics like the importance of your Form W-2. Sent to you by your employer, Form W-2 reports any earned wages, salaries or tips. You got this!
Here are a few additional tips to help you get through your first tax season stress-free:
1. Start collecting tax information early.
One of the biggest frustrations when it comes to filing your taxes is locating the necessary documents and receipts received throughout the year. When you suddenly can’t remember where you put the receipt for your paid property taxes or those medical expenses you had last summer, preparing your taxes quickly becomes a stressful task.
However, if you take a little extra time to plan ahead, you can make your life a lot easier.
You don’t need a showcase filing system to keep good track of your tax information. A simple file or box will do. The important thing is to make sure it all lands where you can find it easily later. Don’t put anything else in this file or box. You’ll save yourself a lot of sorting later.
Start by saving receipts for expenses related to tax deductions and credits in a safe place throughout the year. If you’re self-employed, be sure to save receipts for all business expenses – both big and small.
Be careful not to overlook items such as printer ink, parking and tolls related to business, and other expenses. Keep a notebook or track your business mileage electronically.
Business expenses reduce your self-employment tax, as well as your income tax, so you don’t want to miss any of them.
As your tax information documents start arriving in January, drop them in your tax file or box immediately. Try not to let them land on the counter top or any other place where they might get misplaced.
2. Organize your information.
Organizing your tax information can be as simple as putting your W-4 forms in one pile, your other income in the next pile, and possible deductible expenses in a third.
If you have a small business or other self-employment income, do yourself a favor and make a list or spreadsheet of business income and expenses. Don’t forget to organize information for possible credits, such as the Child and Dependent Care Credit.
Once your information is organized, the rest is easy. When choosing to use TaxAct as your tax preparation solution, you can easily prepare and file your federal and state returns by simply answering a few questions as you go.
3. Figure out if you are a dependent of someone else.
One of the most important details you need to know before you file your tax return is whether or not you are classified as a dependent.
Did your parents pay more than half your expenses this past year? If so, you are generally considered their dependent for tax purposes. As a result, your parents are able take a $4,000 dependency exemption (in 2015) for having you as a dependent. In that case, you cannot take the exemption on your return for yourself.
Talk to your parents and see if they are taking the exemption. The IRS will notice if both you and your parents take an exemption for you.
4. Determine your filing status.
If you’re single and have no children or other dependent relatives, this is easy. You file as Single.
However, if you have children or other dependents living with you, don’t click the Single box too quickly. If you pay more than half the cost of keeping up your home, and your home was the principal residence for more than half the year for a qualifying child or other relative, you may pay less tax by using the Head of Household filing status.
If you’re married and living with your spouse, you’ll most likely want to file as Married Filing Jointly. Generally, couples will pay less tax by filing jointly than by using the Married Filing Separately status.
However, in some situations, you may prefer to file separately; for example, if you keep your finances separately, or if you do not want to be liable for your spouse’s tax bill.
5. Read your return.
TaxAct makes tax preparation much easier than it was back in the day for your parents or grandparents. Gone are the days of having to fill out forms by hand. Now, you can simply input your financial data into one of TaxAct’s digital or download solutions, and follow their step-by-step guidance to get your maximum refund.
However, that doesn’t mean you should just plug in the numbers and file. Be sure to read the entire return. If you don’t understand something, read the TaxAct help topics to learn more.
Reading your return not only helps you feel confident in its accuracy, but it also helps you understand how taxes work. TaxAct customers can use Refund Snapshot to get a clear picture of how specific deductions and credits can affect your tax refund or amount owed.
Building your knowledge about taxes and your financial situation can help you to better plan for years to come.
6. Give yourself enough time.
Your first return shouldn’t take too much time, but you don’t want to rush it. Starting early in the year gives you a chance to work on your return without the stress of a close deadline.
The filing deadline for federal income returns for tax year 2015 is April 18, 2016. Filing deadlines for state income tax returns vary by state. Be sure to mark your calendar to give yourself enough time to meet the deadlines.
However, if you find yourself trying to beat the clock, you can file an extension allowing for more time. It’s far better to get a filing extension than to hurry and possibly miss deductions and credits that could have saved you money.
7. File your return.
It feels so great to finish your return. If you’re filing by mail, however, don’t forget to sign it! Also, attach Form W-4 and any other required forms to your return before mailing.
If you choose to electronically file (e-file) using TaxAct, just click the Filing tab. Onscreen prompts will take you through the process to e-file your return. Use the following steps to ensure your return is filed correctly.
- Step 1: Review Your Return
- Step 2: Begin the Electronic Filing Process
- Step 3: Sign Your Return
- Step 4: Submit Your Return
Did you understand how income tax withholding worked before you started getting your first paychecks?