Top Tips for First Time Tax Filing
When it comes time to file taxes, it can be extremely confusing and stressful for beginners. But, I’m here to tell you that paying Uncle Sam doesn’t need to be hard if you understand some basic principles and have a little patience.
The following guide will give you the groundwork to make sure you’re on the right path.
The Bottom Line
The US tax system boils down to residents owing the government a portion of their income. This deduction is taken on a pay as you go scheme throughout the year, which means you can’t know if you’ve overpaid or underpaid Uncle Sam until you file your tax return near the end of the financial year. Once the IRS processes your form, they will either give you a refund or ask you to pay the outstanding balance you owe (the deadline for paying this is April 15th, if you’re late you’ll also have to pay penalty fees).
There are basically two ways to reduce your income tax – reduce your income (investments can come into play here) or make clever use of tax preferences (which nearly everyone is entitled to). These preferences are called the ‘standard deduction’ and the ‘personal exemption’. They cover such things as deductions for student loan interest, tax credits for college, and credits to help you save for your retirement.
Where to Start
The easiest IRS form to use for filing your taxes is the 1040A or 1040EZ, so my advice is to start from there since they cover people with reasonably straightforward finances. The 1040A is called the short form – it’s only two pages in length and will handle most of your income, tax deductions and credits. The 1040EZ can only be used if you’re single or married with no dependents and are not looking for tax credits.
If you have more complicated finances such as investments, you’ll need to go for the longer Form 1040, which allows you to itemize your deductions.
You could always hire an accountant to handle your tax filing if you’re willing to pay their fees. Or, these days you can find software which helps you file your return electronically, complete with accurate calculations and guidance on getting the biggest refund possible. This is a good option as it’s affordable and will really make your life easier.
Tax Documents
It’s really important to get your tax documents in order as this will expedite your tax filing. Be extra thorough with the W-2 form – carefully read what’s in all the boxes and labels, plus don’t forget to scrutinize the back of the W-2. The more you take time with this, the better chance you’ll have of getting it right. Tax documents are the foundation starting point of your tax return, so they need to be taken seriously.
Tax Return Tips
Preparation
It’s a good idea to first prepare your tax return on paper using the correct forms as described above. Next, it’s advisable to prepare your tax return on your PC using tax software. These types of programs don’t cost alot and will help you make correct calculations. You can then compare the software figures to your original paper version. If they match, you will feel confident that you’re in the right ballpark.
Help
Especially if this is your first tax return, you should consider a professional tax preparer to review everything so that you can be sure that you haven’t missed anything. Don’t wait too long to call them as they get really busy during tax season and you might have to wait for an appointment. Most tax offices will review your tax return either for free or for a minimal charge. They can often really make a difference as with their expertise, they should be able to tell you pretty quickly if your tax return has any problems. The review should only take about 15 to 30 minutes so it won’t eat up much of your time.
Another great resource for help and answers to your questions is the Internet – there are many online tax forums where people just like yourself are working out their tax returns. They tend to have friendly communities who can either answer your question or point you in the right direction.
Conclusion
With a little patience and care, you can file taxes without stress. The great news is there are lots of places you can go for guidance – from software programs and tax specialists to online forums and articles like this one, if you take the time to look you’ll have all the help you need. And with more experience, the process will get even easier over time.
About the Author: Bob Goren is an independent advisor on how to file taxes in the US.
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