What I Learned Filing My Taxes For The First Time
This year marked my big venture into adulthood: I graduated from journalism school, got my first salaried job—and filed my taxes for the first time.
So I gathered my forms, booted up my laptop, and hunkered down for a few hours to calculate my refund.
This year I received three W-2 forms, one for each of the internships and part-time jobs I held during 2015. Though I live in New Jersey, two of my positions were based in New York City. For those jobs, I reported my income and paid taxes to the state of New York. New Jersey also taxed my income from New York-based jobs, but I got credit back from the Garden State for the taxes I paid.
I also got a 1099-INT for the meager amount of interest I'd earned on my savings account. Whether or not your bank sends you that form, you'll need to report any income above 49¢. I was initially confused by the 1095-B form that showed up in the mail, but I learned that it's new Obamacare paperwork, which confirms that you had sufficient health insurance coverage to avoid a tax penalty.
The process itself was fairly straightforward. I looked at the free filing resources listed on the IRS website and settled on MyFreeTaxes.com, one of many sites that allow taxpayers who made less than $62,000 to prep their return for free. The site guided me at every turn, letting me know which boxes on my W-2 and 1099 forms matched up with the corresponding spaces on the website. Admittedly, as a 23-year-old without a mortgage or stocks, I didn't have a particularly complicated return. But the process nonetheless took me about three hours, and I was happy to discover I ended up with some extra money to put into my savings account.
Here are the tricks I learned along the way:
1. You can get help for free
Chances are, you should not be paying to prepare your tax return. The IRS partners with the Free File Alliance, a non-profit group of tax software companies that helps people do their taxes for free. If you fall under a certain income threshold ($62,000) or meet other criteria, such as being an active member of the military, you get access to a number of commercial tax-prep websites that will guide you through the process free of charge. You can see if you qualify here.
2. It pays to be really meticulous
The best way to do that is to keep records of any expenses that might be tax deductible throughout the year. Make a list of all the documents you might need and have them on hand as you're filing your taxes. That's especially true if you're planning to itemize your deductions.
Read More: 30 Tips for Doing Your Own Taxes
3. This may be a lot easier than you think
For me, the most surprising part of doing my taxes was how simple it was. The list of documents I needed—my W-2 forms, my form 1098-T for my grad school tuition (more on that later), and a 1099-INT for bank interest—was not extensive. And the process of entering the information into the site was logical. I learned that doing your taxes is not as daunting as it may seem. The simplicity of the process (at least for me, at this stage in my life) was a pleasant surprise.
4. You may find that you qualify for unexpected deductions
I was also pleasantly surprised to learn that I could take a deduction for tuition costs, as well as for interest on student loans I'd taken out last year. You can deduct up to $2,500 in interest on a loan for qualifying college costs, as long as your modified adjusted gross income is below $65,000 a year ($130,000 if you are filing jointly). If you're on the job hunt, you may be able to deduct costs associated with it, like travel and resume printing. You can also get a write-off for things that, frankly, you might never have expected. For instance, if you keep careful records, you might even be able to claim your gambling losses—but only to the extent that amount doesn't exceed your winnings.
5. You should call your parents
If you're a student or recent graduate, talk to your parents first: They might be planning to claim you as a dependent. (I had to call my parents and check about that). In that case, you cannot also claim a personal exemption, the dollar amount that each taxpayer can deduct from his or her income. They might also be planning to write off some of your college costs on their return. To avoid problems, take a look at each of your situations and figure out which approach would maximize your refund.
6. Don't file too early
If you're a first-time filer, take advantage of the time you have to learn. Research every possible rule that might allow you to get cash back. And rushing the process, especially your first time, might result in an error that could cost you money. If you need more time, you can apply for a six-month extension from the IRS by filling out a Form 4868.
7. But don't file too late
You want to give yourself plenty of time to dot your i's and cross your t's, as well as to allow for unforeseen circumstances. What's more, the earlier you file, the less chance you have of getting your identity stolen. And of course, if you file late, you'll be slapped with interest charges and late fees, so you'll want to avoid that as well.