It's tax season. If this is your first year, you have a lot to learn about how to file your taxes. Learn tips, tricks, and how-to at TD Ameritrade.
Is this the first year you’re filing an income tax return? Welcome to the adulthood starting block!
While we all know that “adulting” can be challenging, learning how to file taxes doesn’t have to be. The good news is that as a first-time filer you probably don’t have a very complex tax form. Still, there are some steps you can follow to make the process go more smoothly as you make your way around the tax filing track.
If you’re learning how to do taxes for the first time, it’s good to check with your parents, especially if you’re a student. Although you might be tempted to check the box that says “dependent” on your 1040 form, your parents may have another idea. If your parents are still supporting you, they are likely to claim you as a dependent.
Next, make sure you have what you need before filing, said Lisa Greene-Lewis, a certified public accountant and Intuit TurboTax blog editor. If you’re employed full-time, your company will send you a W-2. If you have a side gig, expect a 1099-MISC, which is a tax document that reflects payment for services to an independent contractor. Do you drive for Uber or sell through Etsy? You may get a 1099-K, which is what people who use third-party merchants like Paypal for payment receive. How about an interest-bearing checking or savings account, or savings bonds? For each account from which you receive interest, you should receive a 1099-INT.
And although you don't need to file your 1099s along with your return, you do need to report all of the information correctly on your 1040. Remember—every 1099 issued to you was also sent to the IRS by the payer, and the form includes your Social Security number, so the IRS can track you down.
Knowing which documents to expect can help you determine when you can file taxes. Although the tax deadline is in April, you might wish to file as early as you can, especially if you expect a refund.
“The IRS says it issues 9 out of 10 tax refunds in 21 days or less. One thing millennials should know is that last season, close to 75% of taxpayers received a refund close to $2,800,” says Greene-Lewis.
The form you use depends on whether or not you have deductions. If you’re paying for college and have student loans, opt for 1040-A, Greene-Lewis said. It lets you apply for education credits like the American opportunity tax credit, available for the first four years of college, and worth up to $2,500. The Lifetime Learning Credit is worth $2,000, and if you have student loans, you can deduct interest of up to $2,500.
If you don’t have those deductions and just have a W-2, try the 1040-EZ form, according to Greene-Lewis. Whether you’re a 1040-EZ or 1040-A filer, there’s no need to go to a professional tax preparer, she said. TurboTax now allows filers to snap a picture of their W-2, and data is transferred to the correct form.
“You don’t have to know anything about taxes or tax rules,” she said. “We ask simple questions about you, then we do everything on the back end. You don’t need to do the tax laws.”
Using electronic software also makes it easier to file online, which can prevent a return from getting lost in the mail. Using e-file allows you to get a direct deposit of any refund. Plus, it’s the fastest way to get your cash, she said. And, depending on your situation, you may be able to file your taxes for free.
If you have a job and you think you didn’t make enough for the IRS filing threshold (which, for the 2017 tax year, is $10,400 for people under 65 years of age), you should still file a federal tax return.
“You had federal taxes taken out; you may get that back,” Greene-Lewis said. “The IRS says they have close to $1 billion in unclaimed funds. The average amount is $700 for unclaimed refunds.”
Plus, depending on the tax rules in your state, you should file a state return as well. Many states have a different threshold.
You've crossed the line into adulthood; congratulations. Plenty of exciting and challenging opportunities lie ahead. Taxes are just one of those necessary unpleasantries along the way.
Debbie Carlson is not a representative of TD Ameritrade, Inc. The material, views, and opinions expressed in this article are solely those of the author and may not be reflective of those held by TD Ameritrade, Inc.
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