Economy & Jobs
Filing Your First Tax Return: Expert Advice for Novice Filers
Are you filing your first tax return this year? Or is a friend or family member a first-time filer? Welcome to the club. According to the IRS, more than 147 million individual tax returns were filed in 2013. That’s a lot of tax returns, and everyone has had to file their first one at some point. However, filing for the first time can be confusing. Should you hire someone to help you, or do it yourself? What exactly are all those forms you’ve been sent, and what should you do with them?
With April 15 is quickly approaching, here are some basic tips to help make tax time simpler for any novice filer.
Keeping Track of Tax Forms
The simplest way to make filing your first tax return easy is to stay organized. Typically, you’ll start receiving lots of tax documents in December and January. If you worked during the past year, you’ll receive a W-2 or 1099 from your employer showing how much you made. Your bank will also send you a 1099 showing how much interest you earned. If you’re a student, you’ll likely get a 1098-T showing how much tuition you paid or a 1098-E from your loan provider, which will show how much student loan interest you paid.
All of these documents must be reported to the IRS because they show how much income you earned and how much you paid in taxes during the previous year. Once you start receiving these forms, it’s extremely important that you keep them in a safe place in preparation for filing your taxes. You’ll need all that information in order to accurately prepare your return—whether you pay for someone’s help or do it yourself.
Filing in a State With No Income Tax
Currently, the residents of seven states enjoy the benefits of have no income tax: Alaska, Nevada, Florida, Texas, South Dakota, Wyoming, and Washington. Additionally, Tennessee and New Hampshire both do not tax on personal income, but do tax on investment income and dividends. If you live in a state that doesn’t levy individual taxes on your income, remember that the federal government still does. You’ll need to file a federal tax return, but you won’t have to file for your state. This can save you both time and money while making the entire tax return process simpler.
Since filing your first tax return is something you’ve never done before, you might be wondering whether to hire someone to help you. For most filers, it’s cheaper and easier take on the process themselves. Unless you have a complicated tax situation—and most first-time tax filers don’t—you can save money and time by doing it yourself.
Additionally, a number of services offer free filing for federal tax returns. If you make under $60,000 per year, you can file your federal return at no cost via the IRS Free File program. Many of the other most popular software programs, including TurboTax, H&R Block, and TaxACT, also allow free filing for federal returns. They do, however, charge for state income tax returns.
The average tax refund takes 21 days to process, according to the IRS. So if you’re expecting to receive a refund, you’ll want to file as soon as possible. Even if you owe taxes, you can still file early and not pay until April 15. The key is to be organized with your documents and give yourself enough time to prepare the return accurately. If you make a mistake or don’t report something correctly, it could result in financial headaches down the road.