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Individuals Who Are Filing Their First Tax Return Can Benefit From This Step-by-step Tax Guide.

Individuals Who Are Filing Their First Tax Return Can Benefit From This Step-by-step Tax Guide.
Individuals Who Are Filing Their First Tax Return Can Benefit From This Step-by-step Tax Guide.

1. Determine if you need to file.

Because this is a complicated situation, you should consult a tax professional or seek free tax assistance before deciding not to file a return. The IRS generally only requires a tax return if one of the following conditions is met:

– Your gross income is more than $12,400 for single taxpayers and $24,800 for joint filers.
– You made at least $400 as a self-employed person.
– Your house was sold.
– On retirement disbursements, you owe taxes.
– You owe money to the government for unpaid Social Security, Medicare, or income taxes.

This is not an exhaustive list, and consequences for failure to file can be severe, so make sure you’re exempt before you don’t.

2. Be aware of your deadlines

When it comes to the IRS, dates are crucial, so be sure you’re aware of the tax deadlines. The most essential date in terms of tax filing is April 15, which is when your tax return is due each year.

Please be aware that the IRS has set the federal income tax deadline for individuals for the 2020 tax year as of May 17, 2021. State deadlines, on the other hand, have not been altered, so double-check your state’s deadline before filing.

Some taxpayers, particularly those who are self-employed or have nonwage income, are required to pay estimated taxes every quarter. However, deadlines are not every three months as you may think. Estimated taxes are due on April 15, June 15, September 15, and January 15 of the following year.

Employer Deadlines should be noted on your calendar.

You should also know when you can anticipate your employers to send you all of your tax paperwork. Employers must file tax papers such as the W-2 and 1099-MISC by January 31st, according to the IRS. If you haven’t received your forms by the deadline, you should contact the payer.

However, not all income tax forms are due on the 31st of January. Form K-1, which records partnership revenue, for example, isn’t due until March 15th. You’ll know when to expect your required papers if you grasp the tax-filing calendar.

Individuals Who Are Filing Their First Tax Return Can Benefit From This Step-by-step Tax Guide.
Individuals Who Are Filing Their First Tax Return Can Benefit From This Step-by-step Tax Guide.

3. Get started as soon as you can

Even if you don’t have to file your taxes until mid-April, it’s never too early to start planning. Know what to expect when you receive your forms so you can make any necessary repairs promptly if there are any errors, which are so prevalent that the IRS has established processes for dealing with them.

Allocate Enough Time

Filing a tax return can take hours and hours of effort; according to one research, Americans spend an average of 17 hours on their taxes.

Even if you use tax software to save time, keep in mind the classic computer adage: garbage in, junk out. No tax software can file your return accurately if you don’t take the time to enter the necessary information.

4. Get to Know Your Forms

Because the IRS receives a copy of your earnings, the information you provide on your tax return must match what the IRS has. Here’s a rundown of some of the most typical and crucial tax documents you’ll receive from your employer:

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– Form W-2, Wage, and Tax Statement, for standard wage and salary payments – Form 1099-MISC, Miscellaneous Income, for non-salaried employees or contractors – Form 1099-INT, Interest Income – Form 1099-DIV, Dividend Income

5. Become knowledgeable about deductions 

The good news is that you don’t have to pay taxes on your entire income when you file your taxes. One strategy to lower your taxable income is to take advantage of tax deductions. You may be eligible for a variety of tax breaks. If you’re a first-time taxpayer, though, it can be easier to take the standard deduction rather than itemize your deductions. However, you should perform the arithmetic to see which choice will lower your taxable income the greatest.

If you choose to itemize your deductions, make sure to claim your student loan deduction.

When it comes to filing your taxes, if you’re paying student loans, there’s some good news: you can deduct some of the interest. You can deduct up to $2,500 in student loan interest starting in 2020. This lowers your taxable income and thus the amount of tax you must pay.

6. Become knowledgeable about tax credits

Tax credits are similar to tax deductions in that they decrease your real tax on a dollar-for-dollar basis rather than reducing your taxable income.

For example, if you owe $3,400 in federal income tax but receive a $1,000 earned income tax credit, your tax liability will be reduced to $2,400. Credits are offered for a variety of expenses, including child adoption fees and the purchase of a first house.

7. Consider Making IRA Contributions from a Previous Year

The option to make an IRA contribution up until the tax-filing deadline — generally April 15 — and have it count for the previous year is one of the most generous aspects of the tax code. This gives you time to figure out where you stand with your tax return and whether you’ll profit from a prior-year donation or deduction.

8. Select the Most Appropriate Filing Status

Most people are aware that they can file taxes as an individual or jointly with a spouse, but they may be unaware that there are five other filing statuses:

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– Head of household – Qualifying widow(er) with dependent child – Single – Married filing jointly – Married filing separately – Head of household – Qualifying widow(er) with dependent kid

If you qualify for more than one status, fill out the forms in every way possible to discover if one is better for you than the other.

9. Determine who will handle your taxes.

You have options if you don’t feel comfortable submitting your tax return, especially if it’s your first time. Because completing your taxes alone can be time-consuming and error-prone, hiring a professional can alleviate stress while also increasing your chances of receiving a larger refund.

The disadvantage is that it is costly. Another option is to use tax-filing software, which is both efficient and cost-effective, and usually comes with a guarantee of correctness.

10. Decide how you’ll file your taxes if you’re doing them yourself.

If you’re doing your taxes, you’ll need to decide which forms to send and whether to file by mail or electronically.

Is it EZ or Not EZ? That is the issue.

If this is your first tax return, you may have a lot less to worry about than someone who owns a business, rents outhouses, or invests in oil partnerships.

The IRS permits taxpayers to file Form 1040-EZ, which is a simplified version of Form 1040, for the most basic returns. Find out if you’re eligible to file Form 1040-EZ, and your first tax return could be a breeze.

If you qualify, you can file for free.

For many taxpayers, the IRS provides free tax-filing software. 70% of all taxpayers are eligible for free tax software under the IRS Free File program.

Income is used to determine eligibility. However, as a first-time filer, if your income exceeds $72,000, you won’t be able to use the Free File software options. However, you can use the IRS Free File Fillable Forms to finish your tax return.

If at all possible, file electronically.

Electronically filing a tax return has several advantages: it is more secure, less prone to contain errors, and more convenient. Since 2012, most tax preparation firms have been obliged to file returns electronically by the IRS.

Individuals Who Are Filing Their First Tax Return Can Benefit From This Step-by-step Tax Guide.
Individuals Who Are Filing Their First Tax Return Can Benefit From This Step-by-step Tax Guide.

11. If you are required to file a self-employed tax return, don’t forget to do so.

Although you may not consider yourself a self-employed business owner, the IRS has a low filing threshold of $400 for self-employed income tax returns. If you have a side gig that pays a few hundred dollars or sell some personal goods and make some money, you can easily reach that level. As a result, be conscious of your responsibilities.

12. State Taxes Must Be Considered

If you earned income in one of the seven states that don’t have state income taxes, you won’t have to file a state income tax return.

Other states’ taxpayers aren’t that fortunate. Individuals in California, for example, pay a top tax rate of 13.3 percent. The good news is that your state income taxes are deductible on your federal tax return.

13. Make sure your math is correct.

It’s simple to make a math error if you complete your taxes by hand. Even utilizing tax software to spot a math error isn’t always adequate, as a transcribing error — such as entering $510 as a dividend distribution instead of $150 — is unlikely to be caught by the software.

The IRS, on the other hand, will undoubtedly take notice. If you underpay your taxes as a result of the error, you may be subject to penalties and interest. Keep an eye out for the usual blunders that first-time filers make.

14. Always submit your paperwork on time

Even if you are unable to pay all of your taxes, you must file your return. Filing but not paying your taxes results in a half-percentage-point monthly penalty. The failure-to-file penalty, on the other hand, is a monthly penalty of 5% of your unpaid taxes, up to a maximum of 25%.

Alternatively, file early to help prevent fraud and expedite your refund.

Filing early can help prevent fraud because the IRS only accepts one tax return per Social Security number. Any fraudsters who have your Social Security number will be unable to file a fraudulent return in your name once your tax return has been accepted.

A tax return filed early will speed up the receiving of your refund in addition to preventing fraud. When it comes to collecting a refund, the sooner you file your taxes, the closer you are to the front of the queue. Your tax refund should arrive in no more than 21 days on average.

15. Make a Strategy for Paying Your Taxes If You Can’t Pay Them In Full Right Away

To pay your taxes over time, you can set up an installment plan with the IRS. Short-term plans of 120 days or fewer can be created for free online. Fees for longer-term plans range from $31 to $225. Until your balance is paid off, you will be liable to taxes and penalties.

16. Create a direct deposit account If you are owed a refund, please contact us as soon as possible.

Choosing direct deposit for your tax return has the same advantages as choosing direct deposit for your paycheck: faster access to your funds and fewer transmission issues.

You won’t have to worry about a check getting lost or delayed in the mail if you use direct deposit. You can also divide your refund between multiple bank accounts.

17. Check the Status of Your Refund

If you can’t wait any longer, go to IRS.gov/refunds to check the status of your return, or use your smartphone to download the IRS2Go app. Keep in mind that the 21-day deadline is only a guideline; if you mailed your return or it contains problems, the refund process could take longer.

18. Stay up to date

If you’re submitting your taxes for the first time, you’ll be ahead of the game in one respect: the tax-filing knowledge you’ll be learning will be current, at least for this year. Keep up with current tax news every year to ensure you file an accurate return and receive all of the tax breaks you’re entitled to.

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