TurboTax / Tax Calculators & Tips / All Tax Guides / General Tax Tips / Filing Taxes for the First-Timer

Filing Taxes for the First-Timer

Updated for Tax Year 2016


OVERVIEW

Filing taxes doesn't have to be complicated for newcomers. The more you learn about the tax system, the less stress you'll feel when filing your first tax forms.


Your first time doing anything is usually a challenge.

You don’t know what to expect. You’re not exactly sure what to do or if you’re doing it correctly. Will you have everything you need? And what are the ramifications if you make careless mistakes?

A lot of such questions may be going through your mind if you are preparing your income taxes for the first time.

What you don't know -- if you did know it -- could make each element of the form on which you file your return make sense.


Many taxpayers cheat themselves out of deductions by not keeping good records.

- Karen M. Reed, director of communications for TaxResources Inc.


 

Who files

Before giving yourself a headache over Internal Revenue Service rules, one expert says, determine if you have to report your income at all.

Atlanta-based Cora Parks, author of the blog TaxToday, said first-time filers need to see if they received enough income for the tax year to trigger the filing requirement.

“This amount is determined by the person’s filing status, age and dependency status,” Parks said.

For example, in 2016, if you are married and filing separately, you must file an income tax return if your gross income was $4,050. If you are single and under age 65, and made at least $10,350, you must also file.

Chart A of "1040 Instructions 2016 details 10 separate filing statuses and the corresponding income threshold for filing.

On the other hand, a self-employed individual who earned the same amount won’t get off so easily, Parks says. Such a person is responsible for the entire amount of taxes due the government -- rather than only half, as is the case with an individual from whose pay income taxes have been withheld and forwarded to the government by the employer.

Filing doesn't have to be complicated for newcomers. Because most first-timers are dependent-free and not bogged down with various claims, they're eligible to use the Internal Revenue Service' s Form 1040EZ. Single and married filers may use this two-page document if they meet all of the seven requirements detailed on the back of the one-sheet form. Among those requirements: Your taxable income must be less than $100,000.

Regardless of whether or not you are required to file, you may want to do so, because if your employer has been withholding taxes, you may be owed a tax refund.

The power of deductions

The need to account for deductible expenses is one requirement for which being a pack rat pays off. It can be a problem for those who throw away receipts and find it cumbersome to jot down things like mileage and expense transactions.

Being able to deduct expenses for your business or household can be one of the bright sides of filing taxes. Those deductions can lead to a refund.

But you must prove what you spent, says Karen M. Reed, director of communications for Citrus Heights, California-based TaxResources Inc.

“The time to get the documentation in order is when you are preparing your tax return -- not one to three years later when you are audited and can’t remember what you did a long time ago,” she said. “Many taxpayers cheat themselves out of deductions by not keeping good records.”

If deductions are later questioned by the IRS, Reed says, deductions for which you have no supporting documentation will be disallowed.

Most deductions require an invoice and proof of payment, such as a canceled check or credit card statement.

Reed says a set of conditions must be met before any deduction is approved by the IRS. She encourages taxpayers to take the time to understand the difference between what is considered personal versus business.

“Many first-time filers believe they can deduct all of their lunches with co-workers as ‘business meals,’” said Reed. “Another example is business gifts. Most people do not realize that the deduction is limited to $25 per recipient per tax year.”

The taxpayer also needs to know that not every deduction affects the amount of income tax due -- or the amount of a refund.

“Many first-time filers are confused when the employee and medical expenses they enter into a tax program do not change the bottom line of their returns,” Reed said. “But the reason is that there are limitations on these expenses, which are only deductible when they exceed a certain percentage of adjusted gross income.”

Status, Form W-2 and Form 1099

Charles Davidson, owner of Redding, California-based Accelerated Education Systems, says that most first-time filers he’s run across have more than one Form W-2, the form prepared by an employer that shows the employee's gross and net wages along with federal, state, Social Security and Medicare taxes withheld.

Davidson says it’s important that first-timers know they may not file until they have the W-2 from each employer.

“Some first-timers are surprised to learn that they have been contributing to a 401(k) or retirement plan through their employers,” he points out. “Contributions to a retirement plan may result in the taxpayer being able to claim the Retirement Savings Contribution Credit.”

You must also consider filing status -- such as single, married filing jointly or head of household. Identifying the proper filing status can be tricky in today’s array of nontraditional living arrangements, Davidson noted, adding that some people misunderstand what claiming "Head of Household" means.

“Many will try to claim head of household even when there is not a qualifying dependent living in the home," Davidson said. “It means a larger standard deduction, so it’s advantageous to file head of household, but if you can’t legitimately file that way, it could mean an audit.” The focus on "Line 4" in the instructions for Form 1040 explains the conditions that must be met in order for the filer to claim "Head of Household" status.

Filing statuses and dependent claims can be confusing even for tax professionals, Davidson notes, and he encourages first-timer filers to research the stipulations carefully.

And you know all that miscellaneous income you earned last year on the side? Yeah, you have to claim that, too. You might or might not receive a Form 1099 from the company for which you performed work as a self-employed person -- an independent contractor.

“Companies are not required to issue a 1099 if the income is less than $600,” Davidson said. “(But) taxpayers must report all income for all sources worldwide. This includes from online activities like eBay or affiliate programs.”

Even if you did earn a little money on the side but didn’t receive a Form 1099, that does not exempt you from reporting that income to the IRS.

“I call these taxpayers ‘accidental business owners’ because they don’t realize that miscellaneous income essentially sets them up in a business,” Davidson says. “They can legally deduct any expenses that enabled them to earn that money. It also means they have to file a Schedule C, which can be much more intimidating.”

Get your mind right

The more you actually learn about the tax system, the less stress you'll feel filing your first forms.

“If you’re a first-time filer, your approach should be calm, focused and curious,” says Karen M. Reed, director of communications for Citrus Heights, California-based TaxResources Inc. “You should take an interest in what you’re doing, as it is a huge component of your financial life.”

Reed advises against waiting until the last minute to think about your taxes, as well as rushing through the process while you’re preparing your return.

“Dig a little deeper and take the time needed to make sure you understand every entry on your tax return,” she said. “And be sure to proofread it: A mistake in just one digit can lead to disastrous results.”

Filing with more peace of mind with TurboTax

TurboTax is developed with first-time filers in mind. We guide you step by step with simple, plain-English questions and apply the appropriate tax laws in the background. We also do the math and fill in all the right tax forms. TurboTax will even recommend the best choices for you when it comes to filing status, deductions and credits, and other areas that affect your taxes. Plus, we check your return for errors and tell you how to fix them. And if you’re ever unsure of an answer, or need some expert advice on your taxes, you can talk one-on-one with one of our highly-skilled tax professionals for free.

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99$34.99*
Start for Free

Looking for more information?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • TURBOTAX ONLINE/MOBILE

  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Free 1040EZ/1040A + Free State offer only available with TurboTax Federal Free Edition; Offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected in March. Special discount offers may not be valid for mobile in-app purchases.
  • QuickBooks Bonus Offer with TurboTax Self-Employed: File your 2016 federal return with TurboTax Self-Employed by 4/18/17 and receive a complimentary subscription to QuickBooks Self-Employed until 4/30/18 at no additional cost. After you file your taxes, you must activate your QuickBooks Self-Employed subscription by 7/15/2017 by logging into QuickBooks Self-Employed via mobile app or at https://selfemployed.intuit.com/login. Once activated, you will have access to QuickBooks Self-Employed until 4/30/2018.
    Offer valid only for new QuickBooks Self-Employed customers.
    • When you use TurboTax Self-Employed to file your 2017 taxes, you will have the option to renew your QuickBooks Self-Employed subscription. If you do not file with TurboTax Self-Employed by 4/30/2018, your QuickBooks Self-Employed subscription will automatically renew on 5/1/2018 for another year at the then-current annual subscription rate. You may cancel your subscription at any time from within the QuickBooks Self-Employed billing section.
  • Pays for itself: In order to pay for the price of TurboTax Self-Employed, you will need at least $600 in deductible business expenses. This calculation is based on the self-employment tax income rate for tax year 2016.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • TurboTax Expert Help, Tax Advice and SmartLook: Included with Deluxe, Premier and Self-Employed (via phone or SmartLook); not included with Federal Free Edition. Feature availability varies by device. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2015 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • CompleteCheck: Covered under the TurboTax accurate calculations and maximum refund guarantees.
  • TurboTax Self-Employed Expense Finder: Available only in TurboTax Self-Employed. Not available for people with certain types of expenses and tax situations including paying contractors or employees, home office or vehicle actuals, inventory, self employed health insurance or retirement, asset depreciation, sale of property or vehicles, and farm income. Some financial institutions limit the timeframe for which historical transactions may be imported by ExpenseFinder. ExpenseFinder expected late January (late February for mobile app).
  • TURBOTAX CD/DOWNLOAD SOFTWARE

  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for e-filing state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected in March. Prices subject to change without notice.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except TurboTax Business.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice via phone is included with Premier and Home & Business; fees apply for Basic and Deluxe customers. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2015 TurboTax products.
  • Data Import: Imports financial data from participating companies. Quicken and QuickBooks import not available with TurboTax installed on a Mac. Imports from Quicken (2015 and higher) and QuickBooks Desktop (2011 and higher); both Windows only. Quicken import not available for TurboTax Business. Quicken products provided by Quicken Inc., Quicken import subject to change.