W-What? A First-Year Guide to Filing Taxes
Most of us probably think of taxes as something middle-aged men in plaid blazers sit around doing all day. (No? Just me?) Today, though, it’s a lot simpler than that, with online programs like TurboTax and H&R Block that’ll do the hard part for you. With April 15th (the deadline to file and pay any money owed) coming up quickly, first-time filers may be starting to sweat. But it’s okay! Take a deep breath and relax – here’s what you need to know.
First things first: Do I need to file?
Depending on how much income you earned this year, you may not even have to. The amount of income required to file changes depending on your age, filing status, and dependency status. Most people filing for the first time will be single, which means you’re required to file if your gross income in 2016 met or exceeded $10,300. However, even if someone claims you as a dependent, you’ll still have to file if you met or exceeded the minimum income requirement.
Even if you didn’t earn enough to warrant it, you should still file, because you may be eligible for a refund if you’ve had federal income taxes withheld from your paychecks. As a general rule, always file if you’ve had income taxes withheld so you don’t miss out on any money you could be putting back in your wallet.
What do I need?
If you need to file (or want to - who wouldn’t want a refund?), hold off until you get your W-2 from your employer(s). This thing is essential to completing your tax returns, since it reports your annual income and how much was withheld in taxes at each job you worked. If you or your family paid tuition and fees in 2016, your school will also give you a 1098-T, which details how much you paid in tuition, enrollment fees, and required course materials. If you’re paying off student loans, you’ll get a 1098-E from your lender(s) or service provider(s), since you may be eligible for a deduction for the interest you paid on your loans. All of these forms must be given to you by January 31st, but you can usually find them online before then.
How It Works:
When it’s actually time to file, you can choose between using a 1040EZ, a 1040A, or a standard 1040 form. As a first time filer, you should be able to use the simplest (EZiest?) of these, the 1040EZ. According to the IRS, you can generally use this version if:
- You’ve earned less than $100,000 in the last year
- Your filing status is single (or married filing jointly)
- You have no dependents to claim, and
- You earned $1,500 or less in interest income (interest earned from investments like your savings account) in 2016
If you meet the requirements for the 1040EZ but are deducting interest from student loans, or claim certain tax credits (like the American Opportunity Credit for college students), you can use the 1040A, which is slightly longer than the 1040EZ (but still simpler than the 1040, don’t worry).
Last is the 1040, which most first timers shouldn’t have to worry about. You only have to use this form if:
- Your taxable income is $100,000 or more, or
- You’ll be claiming itemized deductions, or
- You’ll be reporting income from self-employment, or
- You’ll be reporting income from the sale of a property
When you use a simple tax return, like the 1040EZ or 1040A, you can file federal and state taxes for free with online software like TurboTax or H&R Block just by importing your W-2 and answering a few questions about yourself. Take the easy way and leave the plaid blazers to the accounting majors – planning your spring break trip is enough to stress about without the IRS on your back.