Filing taxes for the first time can be an intimidating experience.
Between knowing how deductions and credits work, which ones are relevant to you and how to avoid making costly mistakes, first-time filers might be overwhelmed this tax season.
Don’t let the complex tax system make your head spin. If you’re filing taxes for the first time, here at six tips to help you cruise through the process.
1. Gather all necessary materials
It’s important to have all of the necessary forms on hand before trying to fill out your taxes.
Aside from personal information, you will also need a W-2 form from each employer; contractors will need a 1099 form. If you have a full-time job and freelance on the side, you’ll need both. The forms summarize how much you were paid in the past year and include the amount in taxes being withheld.
“You should also gather any additional forms that showed you spent money on a big expense, like education or charitable donations, as that should be noted in your return,” says Kathy Pickering, the executive director of The Tax Institute at H&R Block.
2. Educate yourself on key terms and issues of the tax world
Having a basic understanding of key tax terms can make the entire process much more manageable, says Tim Wolfe, CPA.
Wolfe recommends consumers understand the meanings of effective tax rates, marginal tax bracket, tax-free and tax-deferred. It’s also important to know the difference between a tax deduction and tax credit: a deduction lowers taxable income, whereas a credit saves you money on your taxes.
3. Go over recent tax-law changes
This year has brought a wealth of changes to tax law, including:
- New tax brackets.
- The standard deduction has increased to $12,000 for single filers, up from $6,500 for the 2017 tax year.
- This year, personal exemption has been eliminated. “While this change is offset for many by the increase in the standard deduction, it’s important to be aware that the $4,050 exemption is no longer available,” says Mark Jaeger, director of tax development at TaxAct.
While there are endless amounts of resources available online, be sure to check their publish dates. With many changes to the tax laws this year, it’s important to inform yourself with up-to-date information.
4. Investigate credits and deductions relevant to you
Credits and deductions can lower your overall tax bill and might even be able to increase your tax return, should you get one. Doing proper research on credits and deductions relevant to you can ensure you don’t miss out on money this tax season.
Students or former students should consider deductions and credits to help navigate student loans or tuition payments on their taxes.
- Student loan interest deductions 1098-E.
- American Opportunity Credit.
- Lifetime Learning Credit.
Another popular deduction includes charitable giving. If you contributed to a qualifying charity and exceed the new standard deduction threshold, you might be able to write off the donation on your taxes.
5. How to fix a mistake
Even veteran filers can make a mistake on their tax bill — it happens! Instead of panicking, know that you can file an amended return to correct the error.
“To get a refund, the original or amended return must generally be filed three years from the original due date of the return,” Pickering says. “For example, an amended return for tax year 2015 must generally be filed by April 18, 2019.”
6. Consider meeting with an adviser
If you’ve done your research and still feel uncomfortable navigating your taxes alone, it might be time to consider meeting with a tax adviser.
CPA Wolfe says even the most veteran tax filers can have difficulty navigating the system. Reaching out for help not only ensures an accurate filing, but it can help prepare a new filer for their future taxes, too.
“It might make a lot of sense to hire a professional who can help guide the new filer into the understanding where the tax road ahead might lead them,” Wolfe says.
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