101 Guide For First Time Tax Filers

Legal AdviceJune 7, 2021

Doing anything for the first time can be intimidating, and it’s especially true when it comes to important financial actions like filing taxes.

Vonder Haar Law | If you’re filing taxes for the first time, it might get a little overwhelming

Filing taxes at the beginner’s level could be a major achievement for any young grown-up. You might have taken your parents or experienced family members’ help earlier, but when it’s your turn to take responsibility for your funds and file your return, you might easily get the jitters. Even so, it only takes a little practice to master the act, and if you follow the handy pieces of advice given below, you can go through the procedure smoothly every single time.

Read – How to claim missing Stimulus money on your 2020 Tax Return

Collect all your documents

Before you start, you need to ensure you have your:

Tax documents that include other kinds of income,
1099s,
W-2s,
Tax receipts, and
Deductions

Read – IRS First-Time Penalty Abatement

Remember your previous actions

Consider everything you did in the last year that may affect your taxes, including:

Opening another savings account
Changing job
Selling mutual funds or stocks
Paying student loan interest or college tuition fee

File taxes electronically

From settling your bills to ordering dinner online, you can do almost everything from the comfort of your home these days. So why not file taxes online too? E-tax filing saves your time. All you need to do is fill out the correct forms, upload a few documents, and click a few buttons. It saves you a lot of time and eliminates the need to stand in queues or struggle with postage.

CBC | E-tax filing can save you from a lot of manual effort

Don’t forget your alternate sources of income

A large number of youngsters earn from the “gig economy” by freelancing part-time. From being rideshare drivers to making food deliveries or working as a project manager – your gig could be anything. But if you’ve earned money from any such side hustle, remember to report your revenues while filing your taxes.

Consider tax credits and deductions

Tax credits and deductions can decrease your total tax bill and even expand your ITR, so always ensure that you take full advantage of everything you’re qualified to claim. A few basic deductions for first-time tax filers are:

Itemized deduction or standard deductions
Education credits including the Lifetime Learning Credit and the American Opportunity Credit
Acquired Income Tax Credit
Student loan interest allowance
Home office allowance, if you’re self-employed

Choose whether your folks can still claim you as a dependent

Many youngsters get financial help from their folks, even after they’ve begun making money. You may be getting funds from them to bear with living expenditures, or they might be paying your education expenses. If this is the case, your folks may still claim you as a dependent on their ITR.

Live Strong | If your parents are contributing to your living and education expenses, they may still claim you as a dependent on their ITR

Summing up

Since you’re headed towards tax filing for the very first time, it might feel a little overwhelming. But trust us, it’ll get simple. We truly hope that the above-mentioned tips would help you and reap benefits.