As April 15 quickly approaches, people across the country are organizing their finances and filing their tax returns. For the five million Americans filing for the first time this year, the task can be just as intimidating as finding that first job– but it doesn't have to be.
“Tax season can be very overwhelming for those just entering the workforce and with many changes to tax laws going into affect this year it, even people who have been filing for years might need a refresher,” Dr. Carla Johnson, instructor at Everest College-Arlington, said. “Becoming more informed on the filing process is the first step to success.”
Q. Why do I have to file a tax return?
A. Once you start making $9,500 a year you must pay the government a portion of your income, which is deducted from your paycheck each pay period. Filing a tax return is the method of determining if you have over or underpaid what you owe. As you might expect, if you have underpaid taxes, you will owe money to the IRS. However if you’ve overpaid your taxes throughout the year, the government will issue you a refund.
Q: What paperwork do I need?
A.The key documents for first time filers are:
W-4: When you began your new job you filled out a W-4 form. This form lets your employer know how much money to withhold from your paycheck for federal taxes, based on “allowances” you claim. You get one allowance for yourself, one for a spouse and one per dependent you plan to report on your tax return. The more allowances you are able to claim, the less money your employer will withhold for taxes.
W-2: You should receive a W-2 form from you employer either in the mail or via email usually in January. It reports your wages paid and the taxes withheld based on what you filled out in your W-4 form for the tax year. This form serves as a reference when filing your taxes.
1040: While there are three versions of the Tax Form 1040, most first-time filers will use the 1040EZ, which is the least complex form. The 1040EZ is for filing income if you have no dependents, no itemized tax deductions, and no income from wages or unemployment compensation. Other 1040 forms include the 1040A and 1040, which are increasingly more complex.
Q. What determines the amount of tax I pay?
A. There are many factors that affect the amount of tax you pay. The most important is the amount of money you make and the number of exemptions/deductions you are able to claim. Also known as “standard deductions” and “personal exemptions,” these tax preferences can be subtracted from your paycheck before taxes are taken out, thus reducing the overall income you are taxed on. For younger taxpayers, the most common deductions are those for student loan interest and tax credits for college education expenses. Additional deductions can include charitable donations, child or dependent care, and even expenses related to a job search.
Q. When are federal taxes due?
A. The deadline to file federal tax returns is April 15. However, it is important not to wait until the last day to file. As a first-time filer, or anyone for that matter, it is better to have your taxes done early to avoid mistakes and having to pay a late penalty or additional interest on taxes owed.
Q. How can I be sure my taxes are correct?
A. There are many free or low cost resources available to those filing their taxes for the first time. The IRS offers Free File, a no charge online tax preparation program. For a fee, you can make an appointment to have your taxes filed by a qualified tax professional.