How to file taxes [Simple beginner’s guide]

Benjamin Franklin said, “In this world nothing can be said to be certain, except death and taxes”. He was right. But, he left out the part about them being equally terrifying. Tax filing season is around the corner (it’s April 15th this year!) and for filing newbies, it’s quite stressful. Check out our beginners’ guide on how to file taxes.

1. To file or not to file?

First things first, you need to find out whether or not you actually need to file. Much to Benjamin Franklin’s dismay, not all folks are equal in the eyes of Uncle Sam (especially when it comes to taxes).

If you aren’t married, your parents don’t claim you as a dependent, and your annual income is more than $10,350, you probably have to file. But, depending on your age, filing status, and income, you may not need to. Be sure to check out this nifty interactive tax assistant that the IRS put together to help you determine if you need to file. 

2. Documents

If you determine you need to file taxes, your next step is to gather all of the documents you will need for the process. The following is a list of some commonly needed forms, but we recommend taking a peek at H&R Block’s checklist to make sure you’re not forgetting anything.

Personal & Dependents’ Information

• Social security or Tax ID number: If you’re claiming anyone as a dependent or if you’re married, you will need theirs, too. 
• Birthdate: For everyone that may be included in your tax return.

Income & Investments

• Tax statement: This one needs to go alongside these: W-2 form (if you work for someone else), various 1099 and Schedule forms (if you’re unemployed, self-employed, or have a profitable side hustle). Depending on your employment situation, one or more of these forms will be used to verify your income and how much you’ve already paid in taxes. Check out this breakdown of different 1099 forms if you’re confused about which documents apply to you.
• Statements from financial institutions. Consider all of your financial investments and obligations. Do you have an IRA? A mortgage? A student loan? Offshore accounts? Foreign assets? You’ll probably need a form for all of these. 
• Investment-related income & expenses. If you have investments, you may have related expenses that can count as deductibles or have to declare dividends as earnings.

Expenses

When it comes to filing taxes, previous expenses can turn into valuable savings if they qualify as deductions.

• Self-employed & home office expenses: Declaring your expenses is particularly important if you’re self-employed and don’t want to miss out on deductions. Make sure to take into account all of your business expenses by reviewing receipts, registers, account transactions, credit card statements, etc.
• Professional expenses: Even if you’re not self-employed, you may have deductible professional expenses. If you are a teacher and buy your own classroom supplies, that may be deductible. If you must drive for work, mileage costs may also qualify as a deduction. 
• Childcare & medical expenses: Make sure to keep track of what you paid your babysitter, how much you paid for medical insurance, and track healthcare expenses that were not reimbursed. 
• Educational expenses: Gather documents showing how much you have paid in tuition and student loans.

Taxes

• State & local taxes
• Property & vehicle sales taxes

Miscellaneous

Charitable donations, marriage, adoption, major purchases (i.e. a house), disasters and property losses, jury duty, trust funds, gambling income, divorce and alimony, prizes and awards, and a plethora of other factors may affect how you need to file your taxes and the refunds you may get.

Many resources can help you get started on understanding how to file taxes, but if you are stuck on a particularly tricky question, turning to expert financial advice is always a good idea. 

3. Filing

Once you have your heaps of important documents organized, you can begin the actual process of filing your state and federal taxes in one of three ways. Be wise when deciding how you want to file your taxes and make sure to give yourself plenty of time to complete the process. Making errors is common and often costly. 

• D.I.Y. filing: TurboTax, H&R Block, Tax Slayer, and a range of other tax filing softwares exist to help you file on your own. If you decide to take your taxes on alone, we recommend using one of these softwares rather than risk making errors via the old fashioned pen and paper route. 
• Volunteer Income Tax Assistance program (VITA): If you make under $55,000 annually, have disabilities, and/or have limited English skills, you probably qualify to get free help through the VITA program by the IRS. Through this program, many folks can go to a nearby VITA site and a real, live human being will help them to file their taxes. To find a VITA site near you, use the IRS’s location finder. 
• Tax Professional– Filing taxes is intimidating and time consuming. In fact, it’s been estimated that the average American who files on their own taxes spends about 33 hours completing the whole process. Hiring a professional can be advisable for anyone, but particularly for those of us who have a complex situation: perhaps you started your own business, had a significant life change, made a major purchase, have foreign assets, etc. Professionals can help simplify these complexities and also help you to pinpoint opportunities to get refunds that you might otherwise miss out on.

The prospect of filing taxes may feel like a death sentence, but if you follow these steps, you’ll be well on your way to making good with Uncle Sam and the IRS. But, if you are still confused about any step in the tax filing process, don’t hesitate to go straight to the information source and study up on the subject.

Plus, after you’ve filed your taxes, you will eventually receive a tax return, which is a government refund that taxpayers receive if they’ve overpaid on their taxes. Your tax return can be an excellent investment opportunity and is the silver lining of completing this unfortunately boring civic duty.

As you gear up for tax season, keep your eye on the prize and check back in with us to see how you can make that money work for you!