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Seven Must Read Tips for Millennials and First Time Filers
Filing taxes for the first time can be overwhelming. Many first time filers put off filing their taxes based on fear or lack of understanding. But like most things, the anticipation is worse than reality. Filing your taxes yourself has become a seamless process that can be done anytime, anywhere. Here are Seven (7) tips that could help make your first time filing taxes a better experience.
Know If And When You’ll Need to File
If you can be claimed as a dependent on another taxpayer’s return and you’ve had a job—even a part-time one—and earned more than $6,300 in 2016—you’ll need to file. Conversely, if you didn’t have a job but made more than $1,050 on unearned income (e.g., interest from savings account), you will also be required to file.
If you don’t fall into either category and area dependent, you are not required to file a federal tax return. However, if you did work at all and had taxes withheld, filing a return is the only way to get a refund. Plus, it’ll serve as a lesson for future returns. We recommend doing it.
Organize Your Documents
But being organized can relieve some of your stress. Knowing what paperwork and materials you’ll need is a good place to start, especially if you’re filing for the first time. When you start earning an income, opening financial accounts and managing your own money, you may want to begin tracking your paperwork. If you’re preparing to fill out your tax return, here’s a breakdown of the documents you’ll need to gather.
In order to complete your tax return, you’ll need to pull out all of the tax forms that show how much money you made in the past year. You’ll need to account for all of your taxable income, including self-employment income, unemployment benefits, and any interest you earned from an investment or a savings account. If you were employed during the previous tax year, information about your wages and your salary will appear on a W-2 form.
IRA Contribution Statement
If you’re socking away money in an individual retirement account (IRA), there are two good reasons to have documentation showing what you contributed at tax time. First, you may be able to deduct some or all of your contributions for the year. For tax year 2016, you could have saved up to $5,500 in a traditional IRA. Any contributions you make through the April tax filing deadline may also be deductible for tax year 2016.
Lower Your Taxable Income
Even if you don’t have enough tax deductions to itemize your deductions, you may be able to lower your taxable income by taking advantage of a few deductions that will reduce your taxable income.
Receipts for Deductible Expenses
Deductions reduce your taxable income for the year. They can reduce the amount of taxes you owe or increase the size of your refund. For tax year 2016, you may be able to deduct one or more of the following items on your tax return:
For some of these expenses – such as student loan interest – you’ll receive a tax form in the mail from your loan provider. In order to claim the other deductions, you will need to keep track of receipts showing the date of the expense, the amount, who it was paid to and what it was for.
You can see a full list credits and deductions on the IRS website.
Track Your Refund
Once you have filed, what’s next? Time to track the IRS Where’s My Refund to check the status of your return. The IRS will also let you know they received and accepted your return - so you are not left in the dark.
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