If this is the first time that you have filed your taxes, you may be feeling a bit nervous about filing. But for most people, the first time they file their taxes can be painless and quick. Here is a short guide to filing your taxes for the first time without the big expensive tax preparation fee.
Check to see if you need to file or would benefit from filing
One of the first things to remember when you file for the first time is that even if you do not need to file, it may be in your interest to file anyway. So your first question should be, “Do I need to file?” If not, “Should I file anyway?” Here are the times when must you file:
- If your income is over your standard deduction for your filing status (Single: $12,950; Head of Household: $19,400; Married Filing Jointly/Qualifying Surviving Spouse: $25,900)
- If you had net self-employment income over $400
- If you received advanced premium tax credit payments (if you received the 1095-A form)
If these scenarios don’t apply to you, legally you don’t have to file, however, it may benefit you to file your taxes if these things apply to you:
- If you had taxes withheld for you (either from an employer or from unemployment) - Don’t let the government keep your hard earned money!
- If you are eligible for refundable tax credits, like the earned income credit or child tax credit - This is money set aside for you by law, don’t miss out.
- If you need to report income for other benefits
Get organized before you start
Start gathering your forms and information. By having everything together ahead of time, you ensure that you are not scrambling to find information when the tax software asks for it.
- Social security numbers for you (and anyone else on the tax return)
- Gather your identification documents - some states request your state ID number (drivers license or state ID) to verify your identity
- Gather your income forms
- W-2s your wage forms
- 1099-NEC - (you may receive one if you had a side gig in 2022 - think ride sharing)
- 1099-MISC - (you may receive one if you had other income where you weren’t an employee - such as if you helped as a poll worker during an election)
- 1099-G - if you received unemployment (this is for general state payments, you may also have one for your previous year tax refund)
- 1099-R - (you may receive one if you had a distribution from a retirement plan)
- 1099-K - (less likely to be received, but if you received a lot of payments through a credit card)
- Gather your other tax forms and information
- Education documents: you may receive a 1098-T tuition form for educational expenses through your school
- Child care receipts: you can often request a year-end receipt from your child care provider that can help with claiming the Child and Dependent Care credit
- Medical documents: If you purchased your health care through the marketplace in 2022, you should receive (or need to download) a 1095-A form. If you do not include this on your tax return, the IRS will not accept your taxes.
- If applicable, self-employment expense receipts: if you worked a side gig or were self-employed, make sure that you collect your expenses that you had in 2022 so that you could run your business. This can offset your income to help lower your self-employment taxes
- Your bank account information, if you want to direct deposit your refund
Make sure no one else is going to claim you
If you have been claimed on someone else’s tax return in the past couple years, it is a good idea to check with them to make sure that they are not claiming you if you plan to claim yourself on your taxes. If you are claimed on someone else’s tax return, and you try to claim yourself you may cause your tax return to be rejected by the IRS (which delays your refund).
This can happen a lot when students begin working and parents are used to claiming them. A lot of confusion and time can be saved by making a plan with both parent(s) and the student. Depending on if the student is claimed, tax credits can drastically change.
Doing gig work? Make sure you have the information on your expenses
If you are doing gig work (think rideshare driver, delivery driver, or grocery delivery) you will want to be tracking your expenses. Depending on the work that you were doing, things like water bottles for clients, uniforms, or specialized gear can all be claimed as an expense. If you are using your cell phone as part of your business (like a ridesharing app), you may be able to deduct part of your monthly bill. In addition, if you are driving between rides, you can opt to use the standard mileage rate to claim the miles you drove. This can reduce your business income (and thereby lowering your taxable income and taxes) by $0.62 per mile you drove while working in 2022.
One of the best ways to stay organized and simplify your tax preparation is to use an expense tracker to keep track of all your business expenses. An expense tracker or worksheet helps you organize your expenses into the different categories that are reported on your tax return. This can help you when you start entering in your information. Even if you choose to use an in-person tax preparer, they will often ask you to fill out a form that lists the same information. Save time by being prepared before you start.
Find a good software to use if you are preparing your return yourself
One of the biggest things to remember as a first-time filer is that your returns, generally speaking, are going to be simple. For most folks, the first time that they file will only have W-2 forms. If this is your situation, take advantage of the least expensive versions of tax software. Many will try to up sell you on extra products that will not change your refund or ensure that you get any extra money. By paying extra, you are just reducing your net refund.
Some places will also charge you different amounts for additional tax forms or to file your state return. Make sure you calculate how much it will cost you altogether when you are comparing companies. We have seen folks who paid hundreds of dollars to file a return that takes 20 minutes to prepare and file.
Put your information in, and be ready to e-file your return
The biggest piece of advice we give to folks is to take your time entering in information, small number mistakes can change your refund or possibly make you owe. It is a lot harder to find a mistake than to make sure you copied the information from your forms over correctly.
The great thing about good tax software is that by answering some questions, you can use the software to fill out all the forms. Your job is to make sure that you enter in the information from your forms correctly.
Psst, if you were thinking about using a paid preparer, they often make you fill out an intake sheet that asks all the same questions that the tax software will ask. This means you’re paying someone to enter information into software that you’ve already taken the time to write down and collect!