For any young adult, filing their first taxes is a significant milestone. You may have had your parents file your taxes in the past, but now it’s your responsibility to manage your finances and file your own return. Here are some simple hints on how to file taxes on your own for the first time to make the process go more smoothly for you.
Get all of your tax documentation together
You might be eager to file your tax return as soon as you can if you anticipate receiving a refund. You can continue to get crucial tax paperwork in the mail, by email, or online throughout the months of January, February, and even March.
Before you start, gather all the tax paperwork you’ll need, such as your:
- W-2s,
- 1099s,
- tax forms that detail additional sources of income,
- tax deductions, and
- receipts.
If one of these forms is missing when you submit, you might need to later update your tax return.
Consider for a moment everything you did in the previous year that might have an effect on your taxes, such as:
- Switching jobs
- A fresh savings account is opened
- A stock or mutual fund sale
- Paying for college expenses or interest on student loans
Determine if your parents can list you as a dependent on their tax return
Many young adults continue to get financial support from their parents even after they begin to work for themselves. Your parents may still be your roommates, provide you money to help with living expenses, or support your school financially. Your parents may still include you as a dependent on their tax return if that is the case.
Your parents may deem you a dependent in one of two ways:
- Qualifying child: Your parents may be able to claim you as a qualifying child if you are younger than 19 (or younger than 24 and enrolled full-time in school) and your parents are responsible for more than half of your financial support.
- Qualifying relative: Though you did not live with your parents for the entire calendar year of 2021, made less than $4,300, and received more than half of your assistance from them, your parents may be able to claim you as a qualifying relative even if you are not a qualifying child.
If your parents list you as a dependant, they may be eligible for various tax breaks, including the Credit for Other Dependents and the Education Tax Credit. If you made enough money, you must still file a tax return, but you must state on your return that you can be claimed as a dependent on someone else’s return.
In order to ensure that everyone is on the same page before you file, find out from your parents whether they plan to include you as a dependent.
Look into appropriate tax credits and deductions
You should make careful to claim all of the tax credits and deductions you are eligible for because they can reduce your overall tax liability and potentially raise your refund.
For first-time filers, a few typical tax credits and deductions are as follows:
- Credits for education, such as the American Opportunity Credit and the Lifetime Learning Credit
- Interest deduction for student loans
- Itemized deductions against the standard deduction
- Credit for Earned Income
- If you are self-employed, you can take a home office deduction.
Studying the guidelines for obtaining these tax deductions and credits is not necessary.
Keep in mind the money you make from the gig economy
Young people work in the gig economy in their millions as rideshare drivers, package or food delivery workers, full- or part-time freelancers, or project-based consultants. Don’t forget to include your revenue from gig work on your tax return if you’ve earned money from freelancing.
- You can be given a 1099-MISC for your work, depending on how much money you make. You must still disclose the income to the IRS even if you don’t.
- You must include Schedule C, which is an attachment to your Form 1040, in your income tax return.
- Typically, you can deduct any costs associated with your gig job on Schedule C as well, including mileage, supplies, and advertising charges.
File electronically
Nowadays, almost everything can be done online, including ordering lunch and paying your bills. This includes completing your taxes. Because it guides you through a series of questions, completes the proper forms, and helps guarantee you claim all available credits and deductions.
You won’t have to worry about the proper postage or wait in line at the post office if you choose to e-file your return rather than print it out and submit it to the IRS.
- According to the IRS, people who electronically file their tax forms frequently receive their refunds in as little as three weeks.
- If you choose to have your tax refund immediately deposited into your bank or savings account, you’ll frequently get your money even faster.
It’ll only become simpler now that you’re on your way to filing your taxes for the first time.
