Doing taxes for the first time? 5 foolproof tips to make filing your 2016 returns painless
If you ask your parents for help with taxes every year, you're hardly alone: At least one-third of millennials turn to Mom and Dad come tax time, according to a recent survey by TaxAct. But while getting advice isn't a bad idea — at the very least, you need to know if they still plan to claim you as a dependent — sooner or later you're going to have to start figuring this stuff out for yourself.
Doing your taxes for the first time may seem daunting, but it's actually the easiest when you're young, because you are less likely to be married, have kids, own a home or have any other circumstances apply to you that make filing more complicated. Plus, less complicated tax returns can be cheaper — and even sometimes free — to file.
Here are five tips for doing your taxes like a boss from the get-go.
1. Gather your documents
Start by gathering documents, including your W-2(s) and any 1099 forms for income from freelance work, banks or investment accounts. If you moved out of your parents' home in the past year, ask Mom and Dad if they have them. Also check online, as many financial companies post the documents you need right on your account.
Employers are required by law to provide your W-2 by January 31. If you haven't received a W-2 from any company you worked for, contact them. If you can't reach them, contact the IRS, which can help you find a workaround.
You'll want to claim some deductions to get the most money back from Uncle Sam. Tax software will walk you through any perks you may be eligible for, but some common ones include charitable contributions, student loan interest and your 401(k) or IRA contributions. Make sure you have records for all deductions, even if it is just a bank or credit card statement.
2. Not sure what paperwork you need? Ask for advice.
Mom and Dad may be your first stop for advice. "Your parents or a trusted advisor can tell you if you have all your paperwork in line and what documentation you need," Glenn Brown, a tax analyst at the Tax Institute at H&R Block, said in a phone interview. "Although it may be clear to you before you ask, you may find out you are missing key pieces of information, just by talking to someone who has done this many times in the past."
One tool your parents didn't have when they were your age is access to online resources. Helpful articles and free advice are everywhere. If you want in-person help, search for "free tax advice" in your area for numerous walk-in tax centers.
3. Bite the bullet and start filling out those tax forms
OK, so you're ready to start. But wait. Which tax form should you use? The typical first time filer is safe with the 1040EZ form. "First-time tax filers usually don't have many tax issues so the 1040EZ is a simple process, and often inexpensive for your returns," Brown said.
But here's a secret: You don't even need to know which form you are filing out when you start doing your taxes online because tax software automatically picks the right ones based on the information you provide. Cool, huh?
Start by figuring out if you can file for free. IRS Free File provides free online tax software to those who make $64,000 or less, and TurboTax, Credit Karma, TaxAct and H&R Block all have free deals for people with simple tax returns and minimal deductions. If you can't find a free program you like, consider upgrading to a paid version, which usually comes with more help in the form of live chat or phone support, and more guidance as you fill in your information.
A paid tax preparer should be your last resort, as they will likely cost several times the price of online software. If you do go this route, see if Mom and Dad's accountant might give you a break on the price. Also consider asking your friends if they have an IRS-approved tax preparer they like.
4. Don't forget to save a copy of your return
Mom and Dad probably have copies of your old tax returns, but now that you're doing this on your own, you need to start filing these away yourself. The IRS recommends keeping at least the past three years' worth of tax return information.
Saving a copy of your return will make it easier to fill out your forms next year (because tax software almost always asks you about past returns) and amend your return after you file if you've made a mistake. Past returns also come in handy for verifying your income when renting an apartment, buying a home or applying for a loan.
5. And now for the fun part — tracking your refund!
Refunds typically take 21 days or less to arrive, but the wait can be painful. If you get antsy, there are two ways to track your refund: through the IRS' Where's My Refund site or through your online tax preparation software. If you chose direct deposit, keep an eye on your checking account balance. If it suddenly goes up, there's a good chance Uncle Sam finally did right by you.
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