For many filers, preparing their first tax return seems like a daunting task, but it doesn’t need to be—so long as they know what they’re doing going into it. By following these tips and tactics, rookie taxpayers can save time and some of their hard-earned money on their first bat:
File using tax software. Let’s face it: You don’t know or want to know the entire tax code. Tax software makes sure you don’t miss out on tax deductions and credits you’re eligible for. In addition, you can rest assured the latest tax software is up-to-date with the most recent tax-law changes.
Filing your taxes using tax software also helps you avoid mathematical errors, transposed numbers, and missed deductions. According to the IRS, 20 percent of tax returns filed by paper have errors, while only 1 percent of e-filed returns have mistakes.
By filing online, you’re less likely to overlook tax deductions you’re eligible for, there’s less hassle than going to an in-person accountant, and e-filing with direct deposit will allow you to receive your tax refund within 21 days of acceptance as opposed to the six- to eight-week waiting period for paper-filed tax returns.
A new job and your W4. A new job comes with new responsibilities, including having to file taxes. When you start at a company, your employer will have you complete a W4, which is the Employee’s Withholding Allowance Certificate. This document essentially just collects your marital status and how many tax-withholding allowances you intend to claim.
Filling out your W4 correctly will go a long way in easing the task of filing taxes for the first time.
Stay organized. Good organization begins early. Start a 2012 Tax Year folder to keep all the tax information and documentation you receive leading up to April 15. Once you begin filing your taxes, continue to keep everything tax-related and income-related together for easy access.
Filing the 1040EZ Form. If you’re filing taxes for the first time, there’s a good chance you’ll be filing a simple 1040EZ Form. The major criteria for this form are that you haven’t made any money from investments, you make $100,000 or less per year, you don’t claim any dependents, and you didn’t earn more than $1,500 in interest.
Sound like you? If so, you’re in luck: There are free-tax preparation services for taxpayers with simple returns like yours.
Try a mobile app. Since you’re a first-time filer, you may have a simple tax return with just a W-2 and maybe a little bank interest reported on a 1099-INT. Such filers can easily do their taxes using an app like SnapTax. With the app, you can take a picture of your W-2, answer a few questions, and be done within minutes.
Don’t miss out on common deductions and credits.
• Dependents – Claiming a friend you’ve been supporting or a child may give you a deduction of $3,800 per dependent.
• Earned income tax credit – If your wages meet certain income limitations, you may be able to claim a credit worth up to $5,891.
• Education credits – If you attended college, you may be able to take a credit worth up to $2,500 expenses you paid for tuition, fees, and books.
Don’t procrastinate. Perhaps the easiest piece of advice for a tax newbie to implement is to make certain to file on time. Don’t let the fear of taxes or intimidation force you to ignore the inevitable. Procrastination may have gotten you through college exams, but planning ahead and getting your taxes done early will take you from overwhelmed to empowered. Waiting until the last minute to file your taxes can only lead to a bad experience, so get off your tax filing years on the right foot.
Lisa Greene-Lewis, Lead CPA, American Tax & Financial Center at TurboTax, has more than 15 years of experience in tax preparation, including positions as a public auditor, controller, and operations manager. For up-to-date tax tips and tax news, go to the TurboTax Blog.