Filing taxes for the first time can be hard. However, today we are sharing four tax tips to make sure that your first tax filing experience is a positive one instead of a negative one.
- How to Know if You Need to File Taxes
If you earn income, more than likely you should be filing taxes. However, to know if you are required by law to file will depend on your filing status, income, age, and other circumstances. If this is your first time considering filing, one of the main things you must check is whether your parents or guardian will be claiming you as a dependent. However, each person has different requirements so we will give you an example below.
Example: Let’s say you are single and 18 who is usually claimed as a dependent, but you earned more than $9,000 throughout the year. In this case, you are required to file a tax return, but you can only claim the standard deduction and not the personal exemption. However, if you were not being claimed as a dependent you would not have to file since your income didn’t exceed $9,500.
The bottom line here is knowing when you can file taxes to get a refund for the taxes that you had withheld and you may also qualify for certain credits such as the Earned Income Tax Credit.
- How to Know What Forms You Need? W-4 VS W-2
Your employer should provide you with a W-2 either in the mail or online by the end of January. This form only comes once per year and it shows you the amount of money you made and the taxes that were withheld. The W-4, however, is a form you fill out for your employer. This form is used so they know how much tax they need to withhold from your paycheck.
Your W-4 should be updated anytime something major takes place in your life such as marriage, childbirth, or a home purchase.
- How to Know Which 1040 Federal Income Tax Form to Use
You have three 1040 federal income tax forms available (1040, 1040EZ, and 1040A). 1040EZ is the easiest form to fill out and it is for those who don’t have complex tax situations. 1040 is the most complex form to use and it is for those who don’t qualify to use the other two forms.
1040EZ is for those who do not have dependents, don’t itemize their deductions, and receive income from wages and unemployment compensation, and don’t have more than $1500 in interest income. Additionally, when using this form, you are only allowed to claim the Earned Income Tax Credit. You can even file this form for free using H & R Block resources up until the end of February.
1040A is for those with dependents, dividends, pension income, and education benefits.
1040, the longest form, is for those who have high incomes, are self-employed, itemize deductions, or need to claim credits that the other two forms don’t allow.
- Deciding Whether to do Taxes Yourself or Hire a Professional
There are various tax programs and software’s available online that are easy to follow and make filing taxes yourself doable. However, if you have complex taxes, it may be more comforting to have a professional step in and help you.