Until I started doing research about and writing about taxes for different clients throughout the personal finance niche, I never realized how many people (millennials mostly) don’t know how to do their taxes.
Many millennials are just getting to the age where they have to do taxes on their own for the first time. Fortunately, or unfortunately, I’ve been filing a tax return separate from my parents since I was 15 since I had a part-time job and earned money from selling livestock on my family’s farm.
I’m by no means a tax expert, and I’m not an accountant either, but I still wanted to give some of your tax newbies some tips on how to do your taxes for the first time. If you need help with specific questions though, seek counsel from a tax professional. Do not email me – I’m not a professional! 🙂
Do You Need to File Taxes?
There are certain instances where you might not even need to file a tax return. For 2015, if you are single, under age 65, and your gross income was less than $10,300 you don’t need to file a tax return.
Likewise, if you didn’t provide for more than half of your own support in 2015, you may not need to file a tax return depending on your age and situation. (Usually under age 19 unless you are a full-time student under 24.)
If you can still be claimed as a dependant on your parents’ tax return, you only need to file if:
- You earned more than $6,300
- Unearned income (interest, dividends) is more than $1,050
- Self employment net income was more than $400
Gather all Necessary Paperwork
On the income side of things, you should have received a W-2 from your employer(s) for the 2015 calendar year. This will have a record of your earnings and the amount that was deducted for federal taxes, Social Security, etc.
Contract or freelance work will result in you receiving a 1099 miscellaneous income document. If you don’t get these forms in the mail, you are still responsible for reporting this income! This is why you should always keep track of your own income earned outside of your “traditional” job.
When it comes to tax credits and deductions, you need to put in a little more thought and you might even need to seek council to make sure you are taking advantage of every tax credit and deduction that you are eligible for. Some of the most popular ones include:
- The American Opportunity Tax Credit – for education expenses
- The Lifetime Learning Credit – for education expenses
- Retirement Savings Contributions Credit – for contributions made to your retirement account
- Child Tax Credits
- Earned Income Tax Credit
- Mortgage Interest Deduction – for homeowners
- Student Loan Interest Deduction – you may be able to deduct this even if your parents paid the bills in 2015
- Job Hunting Costs
- Moving Expenses for Your First Job
- Charitable Contributions
There are tons of tax credits and deductions available. These are just some of the more popular ones.
Chose the Correct Form
The next step is to actually fill out your tax forms and file them. If you have a fairly simple tax return with no investments, real estate, or dependent children, you can probably file the 1040EZ. Otherwise, you’ll have to file 1040A or 1040, which are longer forms.
Chosing the correct form is very important. Luckily the IRS website has a lot of guidance, including a Q&A section to help guide you in the right direction.
Filing your taxes doesn’t have to be scary, although it can seem overwhelming the first couple of times. My best tip of all is to spend the money to seek assistance if you need it. This will keep you from ended up with penalties or fees that you could have otherwise avoided.
Have you ever filed a tax return? What tips do you have for first-time filers?