How To File Taxes For The First Time

I remember doing my taxes for the first time. I was 22 and received a bunch of 1099s for doing some background work as an actor. Suddenly these fun jobs didn’t seem that fun anymore. The forms were intimidating, and I didn’t have the slightest idea what I was supposed to do with them. “Filing taxes” was a vague concept to me at the time.

Seven years later, I’m pretty confident doing my taxes. I can’t say I enjoy it (and who does?), but at least I know what’s going on.

If you’re here, you’re probably doing online research on this scary topic. Welcome, make yourself comfortable and let’s talk about how to do your taxes for the first time.

Do you need to file this year?

First things first, let’s figure out if you even need to file. This will depend on your income, age and filing status. For instance, if you’re not married, younger than 65 and your gross income was less than $12,400, you don’t need to file this year. On the other hand, if that income was from self-employment, this would be considered a “special situation,” and you’d be required to file your tax return.

Not sure if you need to file? The IRS has a convenient tool to help you determine that. Just answer a few simple questions.

What do you need to file your taxes?

If you need to file, you’re going to need to gather your tax forms. They may include:

Income tax forms

These include W-2s, 1099s and other forms reporting any kind of income. Remember that the IRS wants to know about all of your income, including your side gigs, bonuses and interest income (such as from your high-yield savings account, which will send you a 1099-INT form if you’ve earned more than $10 in interest). For instance, Chase has sent me a 1099-INT this tax season because I earned a bonus after opening a checking account with the bank. Sigh.

Deductions

These are the things that can lower your tax bill and add to your refund. For example, if you’re a student, you may be eligible for deductions—your school will notify you of qualifying costs by sending you a Form 1098-T. You can also deduct interest you paid on your student loan. Or, if you’re a freelancer and working from a home office, you might get the home office deduction.

However, it might make more sense for you to go for a standard deduction. A standard deduction is a flat amount the IRS allows you to subtract from your income instead of adding up all of your deductible expenses. The amount typically changes every year to account for inflation. For example, this year, if you’re single or filing separately, you can deduct $12,400—up $200 from last year.

To make sure you’re deducting as much as you can—and that should be your goal, just keep your deductions honest—sum up itemized deductions and see if they’ll turn out to be more than the standard deduction. If not, don’t itemize, because the standard deduction will save you more money.

Note that if you’re itemizing deductions, you need to be able to prove your expenses. This means being organized and keeping receipts so you can prove to the IRS your return is truthful.

Another awesome thing you might be able to do when filing taxes this year is claim your stimulus check if you missed one (or both). You can do so using a Recovery Rebate Credit on 2020 Form 1040 or Form 1040-SR when filing your federal tax return.

“This is the first year that a lot of people I know that graduated college in 2019 will be filing their taxes independently and they usually weren’t eligible for COVID relief/stimulus checks previously since they were probably counted as student dependents despite being independent in 2020,” my colleague Garrett Yarbrough shared with me. “Now that they’re using 2020 tax records, I was able to retroactively claim the full stimulus checks and got them with my tax refund! They were separate deposits that weren’t added to my account at the same time.”

See if you can be claimed as a dependent

Last but not the least, talk to…