So you are filing your taxes for the first time. That’s good news! It mean you probably made money last year. Here is a list of tips to make sure you prepare your tax filing in time and that you maximize your tax refund.
Do I Need To File My Income Tax?
Depending on your age, your marital status and your income, you might not even be obligated to prepare a tax statement. For regular employment income, the limit is around 10,000 USD. For self employed contractors, the limit is much lower. Consult the IRS documentation to find out which filing limits apply to your situation.
On the flip side, if your income if under the obligation limit, it might still be a good idea to file your taxes because you might qualify for a tax refund. You can file your taxes online using many free services.
Organize Your Papers
Dealing with the IRS can be daunting. It’s a lots of forms, codes and lingo. But don’t worry, chances are, if you are filing for the first time, you will only need to fill one or two forms. The secret to being able to fill these forms is having the information handy. So now is the best time to take a filing folder or a show box or a large zip lock bag and to write “INCOME TAX 20XX” with a large permanent marker on it.
Now every time you receive a tax related document in the mail, you will know exactly where to put it. This way you will save a lot of time when you start preparing your taxes. All you documents will be in one place.
If you have worked as a salaried employee in the past year, you will receive W-2 forms. These forms are produced by your employer. They give your the exact amounts for your income and your withheld amounts for federal and state taxes as well as social security. Keep these forms in your tax folders. You will need them to produce your income tax report.
If you have done contract work as a self-employed contractor, you should receive 1099-MISC reports from each of your clients. These forms give you the total earnings for this client for the fiscal year. However there are usually no withheld taxes and fees. Keep these reports for your income tax preparation. Your tax software will be able to calculate the taxes you owe from this self-employed income.
How To File Your Income Tax Report?
You have to main options when it comes to preparing your income tax report: Online Tax Software or Hire a Tax Preparation Professional.
Tax software has come a long way. Most of the online tax software available these days will do a great job of guiding you along for your tax filing. They will highlight missing information, they will suggest deductions to maximize you return. You can even do this from you tablet or your mobile phone.
However, if you feel better talking it through with a tax professional. There are many tax professional, you can consult the IRS website to find authorized providers.
Communicate with your parents
If this is your first tax report, make sure you discuss with your parents the fact that you are filing a tax return on your own. They might be declaring you as a dependent in which case deductions will have to be used only once, either on you tax return or your parent’s tax return.
It will be up to you to analyze each potential deduction and decide where it has the most impact on the overall return. This is especially true is you are a student.