First Time Tax Filing Explained
By Lauren Bayne Anderson
April 15th is this year’s nationally dreaded tax day. But don’t despair. While this may represent a challenge if it’s your first time filing, it can also pay off big if you wind up with a refund. The long and short of it is, you won’t know if you’re owed a refund until you file. But completing the whole process is relatively simple and takes only a few hours. Here’s how to go about it in the easiest way possible.
Get Your Stuff Together
Here’s what you’ll need:
W-2 Form : The most important form you’ll need is a W-2 from your employer. This is the form that tells the IRS where you worked, how much you earned, how much you paid in taxes and more. Collect a W-2 from each job you’ve had over the last year. Note: Your employer is required to send your W-2 by the end of January, so if you haven’t received it, hit up your HR department immediately.
1098-E Form- You’re officially in the “real world” now, and unfortunately for many, that means paying your student loans. But there’s some good news. You can write off a certain amount of the interest you’ve paid on your student loans in the past year. A form 1098-E will show the IRS exactly how much you’ve paid in interest on your student loans.
Your Tuition Receipt – Bonus: You can also write off up to $4,000 in education expenses spent over the last year—including tuition (even if you’ve already written of the student loan interest you’ve used to pay for it! Score!) So, if you’ve recently graduated, don’t miss out on this one.
Misc. receipts and other documentation – If you work from home, travel for your job, or have dependants, you’ll be able to lower your tax bill, but you’ll need documentation to prove it. For example, did you know that if you’ve worked from home, you can write off a portion of your rent and utility bills? Save all receipts, they will come in handy in these cases. Also, if you have a child or are married, and want to file jointly or claim head of household, you’ll need the social security numbers of your “dependants”.
1040EZ, 1040, 1040A Tax Forms or Website for Electronic Filing – You can either pick up for the forms from local places like the library, or you can file online electronically, which is the greenest, easiest and most efficient way to file. There are a number of sites that will file simple tax returns for free or charge a minimal fee. Some popular sites are TurboTax, and TaxACT. You can also file for free electronically on the IRS’ website . If it’s your first time, and you have deductions (like student loan interest, etc) you may want to use a commercial site, which is more intuitive for inexperienced tax filers and can help you find the most deductions that you qualify for.
How it works
Once you’ve got everything together, you can start filling out the forms. As complicated as the U.S. tax code is, the 1040EZ – the form most first timers will use to file—is just what its name implies: easy. Once you have your forms, you simply input the information from your W-2s into the appropriate sections. To make matters even more fool proof, each box is labeled with a corresponding number.
Commercial sites like TurboTax will ask for your information and input it for you, making the process even smoother if you decide to use them. They will also alert you when you may qualify for a deduction—which means more money in your pocket that you may have missed on your own. But again, they are only worth paying for if you have deductions.
What If You’re Late Filing?
If you miss the deadline to file and have not filed for an extension, it’s very important to file your taxes as soon as possible.
The good news is: If you don’t owe anything, there’s no penalty for filing late, even if you didn’t ask for an extension!
But if you owe money, you’ll get a penalty for filing late without an extension. The fee can be up to 5 percent of the amount due with your return for each month that you’re late. Ouch! So, better to get done ASAP.
Good to Know:
- If this is your first time filing your taxes, be sure to chat with your parents or anyone else who can claim you as a dependent first. Only one person can file for you. So, be sure to let your parents know that they will no longer be able to claim you as a dependant if you’re filing on your own this year.
- You must file a federal income tax return. But don’t forget to file your state taxes also! You can wind up getting back a few extra bucks this way.
- File all of your paperwork away for next year, including receipts and any other documentation. Sometimes you’ll need the previous year’s information to file for the current year. Having this handy will save you a lot of time and trouble. Also, you could need it in the event you’re ever audited in the future.
- If you can’t file on time, file an “extension”. It’s free, easy and it keeps you from paying a penalty for being late.
- Filing electronically and having your refund deposited directly into your account is the fastest and greenest way of getting the whole thing over with, and saves weeks of waiting time if you’re lucky enough to get a refund.