Filling Out a Tax Return for the First Time
Preparing your first tax return can be a little intimidating at first. There are a lot of get-it-just-right-or-else rules to understand, but it can also be empowering and rewarding, at least when you've finished and filed. What's more, it isn't really all that hard. It just takes a little patience and attention to detail.
The Big Picture
The U.S. tax system boils down to this: You owe the government a portion of your income and earnings. Income tax is usually withheld from your pay by your employer throughout the year, based on what you will probably owe given certain factors.
No one knows if you've overpaid or underpaid your tax until you prepare and file your return. If you've overpaid your tax, you'll receive a refund. If you've underpaid, you must pay the difference by the tax filing date, usually April 15. If you pay later than that, you'll owe interest and possibly penalties.
How to Start
The easiest way to file your taxes is with tax software. These programs help you figure out which forms you need to fill out, ask you to input information, and fill the forms out for you. Some tax software is even free to use, such as TurboTax Free Edition and Credit Karma Tax.
If you prefer to fill out the forms yourself, then you can download them from the IRS website. Most first-timers need to fill out Form 1040 for individual tax returns.
Review Your Tax Documents
Gather your W-2 forms and other tax documents. Read what's in all those boxes on your W-2s, as well as the labels and the backs. This will give you an idea of the information that's included on there—basically, how much you earned and how much you paid in taxes over the year through wage withholdings. These tax documents are the starting point of your tax return, whether you file on paper or use tax software to file your return electronically.
Deductions and Credits
You'll hear a lot of people talk about tax provisions with names like "deductions," "credits," and "exemptions." These are all good things. They reduce the amount of tax you must pay. There are two ways to reduce your income tax: One is to reduce your income, and the other involves taking advantage of tax breaks.
Most taxpayers are entitled to the "standard deduction," which is a specified amount that the Internal Revenue Service lets you subtract from your income. The standard deduction varies according to your filing status. If you're single, it's $12,200 for the 2019 tax year.
Personal exemptions no longer exist due to the Tax Cuts and Jobs Act. You may qualify for some tax credits, which are another way to decrease your taxable income and lower your tax bill.
Some common tax credits include the Child Tax Credit, Family Tax Credit, and the American Opportunity Tax Credit.
Practical Tips for Preparing Your First Return
Start by understanding your tax rates. In 2018, a single filer with income between $13,851 and $52,850 will pay $1,385 plus 12% of the amount over $13,851 in federal income taxes. Each state also has its own individual tax rates.
Consider preparing your tax return using free or low-cost tax software. These programs ask you a lot of questions and then walk you through the tax filing process based on your answers. It's simply a matter of inputting data.
Even if you use the software, you might want to try completing your tax return on paper too, so you can see if your tax calculations on paper match up with the calculations in the software. The IRS provides a list of forms you might use.
When you're finished filling out your tax return you can visit a professional tax preparer and have them look over the forms. Make an appointment in advance, especially if it's getting close to the tax filing deadline. Let the office know that you just want someone to review your tax return prior to the IRS receiving it. Many tax offices will do this for free or for a nominal charge.