Taxes. It sounds daunting but filing your tax return doesn’t have to be scary or cause a headache, even for first-time taxpayers. Below, TaxSlayer Director of Education David Elijah provides a guide with important things to know if it’s your first time filing your taxes. Thanks David, and good luck taxpayers!
The first thing I would recommend is to figure out if you need to file a tax return at all.
Generally, there are four factors that determine whether you need to file:
Type of income.
This year for example (on a 2015 tax return filed in 2016), if you are single (your ‘filing status’); you are under age 65; and you made at least $10,300 from wages on a W-2 form; you will need to file a tax return.
How did the IRS arrive at $10,300? This is the total of what the IRS calls your “standard deduction” plus your “personal exemption” amount. The ‘standard deduction’ on a 2015 tax return is $6,300 for a single person, and the ‘personal exemption’ amount is $4,000. Each of these dollar amounts increases slightly for inflation every year. You are allowed to subtract your standard deduction and your personal exemption from your total earnings to arrive at what’s called your ‘Taxable Income’.
If you’re claimed as a dependent on your parents’ tax return, you are not allowed to claim your own personal exemption (the $4,000 amount) on your tax return, because mom and dad are claiming you on their tax return. In this case, if your earned income is more than $6,300, you will need to file a return.
If you’re a student filing for the first time, or if you’re living with mom and dad, don’t file until you’ve talked to your parents! Chances are they will be claiming you on their tax return. If you file your return first, and claim your own personal exemption, it will cause a lot of problems for mom and dad when they file their return and try to claim you as a dependent.
One very important point to remember – if you earn less than these amounts, BUT you have federal taxes (and state taxes, as well) withheld from your paycheck, you will want to file a tax return in order to receive any refund which you may be entitled. The IRS does not issue refunds automatically!
Most first-time taxpayers have no dependents, they have no deductions to claim, and no adjustments need to be made on their tax returns. In this case, they can file a Form 1040EZ. (To use this form, taxable income has to be less than $100,000).
A few tips to keep in mind if your tax return is a little more complicated than a 1040EZ:
Keep good records, and keep them in order. You’ll want to do this as you’re preparing your tax return, and not two years from now, when you’re being audited. In two years, you won’t remember how you arrived at the figures on your return if you don’t have organized records.
Most tax return deductions require some sort of documentation as proof – a credit card statement or a canceled check.
You can’t deduct your mileage going to and from work, and you can’t deduct the amounts spent for lunches with your co-workers.
You can’t deduct the cost of everyday street clothing for your job.
Medical expenses are deductible only if they exceed 10% of your income.
Donations and contributions are deductible only if you file a “Schedule A”, which is the form for Itemized Deductions. Generally, you file this form only if you have a home mortgage, catastrophic medical expenses or huge donations.
You can’t claim your dog, cat or horse as a dependent on your tax return! Just kidding 🙂
If you contributed to a 401(k) retirement plan through a payroll deduction, you may be able to claim the Retirement Savings Contribution Credit. Look for this if you have an amount in Box 12 of your W-2 with a code of “D”.
If you had more than one job in 2015, keep in mind that you need to wait for ALL of your W-2 forms from all of your employers before you can file your tax return. This will save you from having to file an amended tax return later on.
Don’t wait until the last day to file your tax return. This will give you time to do a little research, you won’t have to rush through it and it may end up saving you money in the long run!
Don’t go it alone. TaxSlayer.com can walk you through filing your taxes. Get started today!