When tax season rolls around, many people find themselves overwhelmed and somewhat confused.
While tax laws can be complex and filing taxes isn’t always easy for those unfamiliar with the process, understanding some basic information about individual income taxes in the United States can make things a little easier. This article will discuss six basic steps that first-time tax filers should know.
- Collect all necessary documents for filing your taxes.
To complete a tax return, you will need to have the necessary paperwork on hand. This information may include:
- W2 forms from employers (if you had a paid job during the previous year).
- 1099 forms from other businesses that paid you a salary during the previous year.
- 1099 forms from the bank(s) where you have a savings or investment account(s).
- 1099 forms for any freelance work that you did during the previous year.
- Receipts for paid expenses such as charitable donations, medical bills, and home improvements.
In addition to any of these documents, you will need your Social Security number and either a bank account or an amount of cash on hand to file your taxes.
- Make sure that you are eligible to file taxes.
While the federal government requires every individual who earns above a certain income threshold to pay income tax, they also have special rules for certain circumstances. For example, non-resident aliens or individuals with income below the filing threshold may not be required to file taxes in the United States. Furthermore, some people are not eligible to file taxes until they have reached a certain age.
- Find out which tax forms you need to complete your return.
Depending on the nature of your income and how you earned it, you may need to complete different tax forms. You can find out which documents are necessary by consulting the instructions that accompany tax forms or by visiting the Internal Revenue Service (IRS) website.
- Complete your return.
After you have determined which documents you need and collected all of the necessary forms, you can complete your tax return. Remember to complete lines with an asterisk and be sure to sign and date your return when you are finished.
- Double-check your work.
When you have completed your tax form, read through it carefully from start to finish to ensure that you have not made any mistakes. If you have, go back and start over with a fresh copy of the tax form. If you are not confident about your return, call The Oasis Firm to help you with any tax filing issues you may have.
- Send your return to the IRS or state department of revenue.
After reviewing your return and making it error-free, send it to the address provided on the first page of your tax forms using either a physical mail delivery or a digital one such as an e-file. To learn more about this process, you can read our guide to filing taxes electronically.
First-Time Tax Filers FAQ
- What are the most common mistakes made by first-time tax filers?
One of the most common mistakes is not claiming all the deductions they’re entitled to, mainly because people don’t know what expenses are acceptable or claim deductions for things like self-education or home office expenses.
It’s important to understand that these deductions aren’t just available to people working in the corporate world, and they’re for anyone who has tax-deductible expenses, including students!
Another common mistake is not keeping all of their records safe and organized. A good rule of thumb is keeping all of your financial records for at least seven years after filing them with any taxation authority.
There are a few things we’d recommend you do and keep in mind:
- Make sure you’re eligible to claim deductions for depreciating assets (e.g., furniture or equipment), as well as tools, equipment, and other assets used for self-employed individuals.
- Remember not to follow the lead of others when filing your taxes – it’s a good idea to use tax return calculators and see what else you may be entitled to.
- Make sure you keep all receipts, invoices, and other records in case revenue officers ask for them later on down the track.
- What deductions should I claim on my tax return?
Some of the most common deductions are work-related expenses, including running a business from home, tools, equipment, and other assets used for work expenses that aren’t run-of-the-mill (e.g., self-education or self-managed super fund contributions), travel expenses if you performed work away from your regular workplace, maintenance for cars, or other assets used to fulfil your job.
- Will I be able to claim deductions for my car?
You may be able to claim a deduction for the business use of your car if you’re eligible.
- Can I claim the travel expenses for attending my job?
If your employment requires you to travel away from home, whether for a short or long period, then you’ll be able to claim any additional costs of living away from your usual residence.
- I’m sure I can claim a deduction for my watch, but it’s not exactly business-related. Will I still be able to claim it?
If your watch is considered a tool or equipment used in the course of your employment (e.g., you’re a tradesperson and use it to ensure precision in your work), you may be able to claim this expense.
If you are unsure about how to prepare your tax returns, best to call an expert rather than get it done incorrectly — or worse, not get it done at all. Here at The Oasis Firm, we ensure that we carefully and accurately prepare and file your taxes to help you prepare for tax season with ease year after year!