Filing taxes for the first time is a major milestone. And given that that tax code can be complicated, it’s natural to have questions about filing. Here are some things to keep in mind when filing taxes for the first time:
Get the proper documents together
One of the first things a taxpayer needs to do is to gather their financial documents, such as W-2 forms or 1099 forms. In many cases today, these forms may be digital. To stay organized, taxpayers may want to keep a folder of all the documents they receive so it is all ready to go as soon as possible.
When you’re an employee of a company, you can expect to get a w2 from your employer. If you earned income from investments or as a freelance worker, you’ll likely receive 1099 forms.
There should be one W-2 for each employer from the previous year. The number of 1099 forms, if any, a taxpayer receives is dependent on the type of income received during the tax year.
The consequences of filing your taxes late
If it is a taxpayer’s first time filing, they might be curious about what happens if they file their taxes late? If a taxpayer misses the deadline and did not file for an extension, it is still imperative to file them as soon as possible. If a taxpayer is expecting a refund, there will be no penalty (and technically they can still file for three years), but if money is owed to the IRS there may be a penalty involved that includes interest.
Don’t forget extra income
The IRS doesn’t only want the information from a taxpayer’s primary job, they want everything. So, make sure to include any income earned from the year including freelance work, side jobs, bonuses, and even interest earned. Typically, a taxpayer will receive tax forms from the employer, bank, etc. for these but even if the form does not come, the income should still be reported.
Itemizing vs. Taking the standard deduction
Tax deductions allow people to remove certain qualifying expenses from their taxable income. The standard deduction is a fixed amount set by the government, whereas an itemized deduction will vary from person to person, year to year, and is the sum of all the individual deductions that are applicable to the taxpayer. Whether the taxpayer takes the standard deduction or itemizes depends on their individual situation and deductible expenses incurred throughout the year. Most taxpayers, however, wind up taking the standard deduction
File electronically or by mail
Once all t’s are crossed and i’s are dotted, it is time to file the taxes! Filing electronically is a popular option these days, and can be convenient. Depending on what features a taxpayer needs, the software may be free or come with a fee. If a taxpayer prefers snail mail, that is still an option. It can be more intensive, as all the calculations and forms will have to be done by hand and postmarked by the due date.
Source: Northwestern Mutual
Contact: Don Klein, 1-800-323-7033
Name: Don Klein
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