Now that you’re in college and working, it is most likely the first time you’ve had to file your own taxes. Congratulations, that is a huge step forward in life, but it is also annoying to have to give up some of your hard earned cash to Uncle Sam.
Here are a few things you should know if you are getting ready to prepare and file your taxes for the first time. Keep in mind this is not a definitive list of everything you need to know, but it should cover the basics to get your first tax return done right.
The Basics of your First Tax Return
To get started on your taxes, you need to cover these basics. You will fill out a form 1040, which is the IRS form for your personal income tax return. On it, it will ask a lot of the basic questions like your name and social security number, as well as your filing status.
Be careful on your filing status, as your parents may still claim you as their dependent. As a result, you cannot claim yourself as a dependent. If you are doing your taxes for the first time, be sure to ask them.
After your basic information, you will be asked the basics of your income, such as wages, interest and dividends (from your bank or other account), and other stuff. You will then be asked for any deductions or exemptions you may qualify for.
Finally, you can input the withholding that took place. Withholding is what the government took out of your paycheck all year long. You probably noticed it each week, but didn’t think any more of it. Well, now you will input that on your tax form and your final refund or payment is based on whether enough taxes were withheld all year to cover your final tax bill.
If you withheld too much money, you will get a refund. If you didn’t withhold enough, you’re going to owe.
As you are getting your stuff together, here are the documents you need to track down and have ready:
- W-2: This is provided by your employer and shows how much you made, and how much tax was withheld
- 1099-INT: This is provided by your bank and shows how much interest you earned
- 1099-DIV/B: This is provided by your brokerage and shows how much you earned in dividend income, or how much you had in capital gains or losses
- 1098-T: This is provided by your school and shows how much you paid in tuition
- 1098-E: This is provided by your student loan servicer, and shows how much you paid in student loan interest
You could have more, but those are the most common forms.
If any of that sounds confusing – it’s because it is. Our tax code is some of the most complex on the planet, and as a result, there are a lot of nuances that you should pay attention to, and it’s not easy to do the first time.
However, the good thing is you are not alone in having to file your taxes. Every American has to do it, and so you’re in good company. As a result, there are a lot of options to help you complete your tax return.
It’s important to look at a few things when getting help: the cost, the return, the peace of mind, and the actual help given. You could go with someone cheap, but how do you know they are going to file correctly? If you want peace of mind, you should continue to Never Settle for Less by filing online at https://www.hrblock.com/index.html or in an H&R Block Office.
Many people use preparation services or online programs to file because they find it easier that filling out the forms manually. It is a good solution to save you time, and possibly save you money.
What tips do you have for your first tax return?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.