Filing your federal income taxes for the first time can be daunting, but if you’re wondering how to file taxes, here’s a cheat sheet that might make it easier to get started filing your first tax return.
1. Do you have to file a return? Probably yes.
It depends on your income, filing status, age and other factors. It also depends on whether someone else can claim you as a dependent.
Even if you don’t have to file, you might want to do it anyway: You might qualify for a tax break that could generate a tax refund. So give filing some serious consideration if:
- You had income tax withheld from your pay
- You made estimated tax payments or had last year’s refund applied to this year’s estimated tax
- You qualify for education credits or other tax credits
2. Gather the information you need
You’ll need to do this whether you’re hiring a tax preparer or doing your taxes yourself. The goal is to gather proof of income, expenses that might be tax-deductible or win you a tax credit, and evidence of taxes you already paid throughout the year. Our tax prep checklist can give you more guidance, but here’s a short version of what to round up:
- Social Security numbers for yourself, as well as for your spouse and dependents if any
- W-2 form, which tells how much you earned in the past year and how much you already paid in taxes on those earnings (if you had more than one job, you might have more than one W-2)
- 1099 forms, which are a record that some entity or person — not your employer — gave or paid you money
- Retirement account contributions
- Educational expenses
- Unreimbursed medical bills
- Property taxes and mortgage interest
- Charitable donations
- Classroom expenses
- State and local taxes you paid
- Last year’s federal and state tax returns (if this isn’t your first time filing and you’re just refreshing yourself here)
3. Get the right tax forms
Filling out schedules and worksheets is a common part of learning how to file taxes, but first you have to figure out which ones to file.
The big one is Form 1040. It’s the standard federal form people use to report their income, claim tax deductions and credits, and calculate the amount of their tax refund or tax bill for the year. There are six additional schedules that you may or may not have to tack onto that, depending on your tax situation and whether you want to claim certain deductions and credits.
4. Decide if you’re going to DIY or hire a pro
|It might be best to hire someone if...||You can probably use tax software if...|
|» MORE: Questions to ask if you’re hiring a tax preparer||» MORE: See our picks for the best tax software|
You may be able to get free name-brand tax software. Many major tax software providers offer free versions for people with simple tax situations. Also, the IRS’s Free File program gives away tax software if your adjusted gross income is less than $66,000.
5. Take advantage of free tax help
The IRS’s Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) program provide free tax prep services generally to people who make $54,000 or less, have disabilities, are older than 60 or speak limited English. This can be a huge money-saver if you qualify. To find locations in your area, go to irs.treasury.gov/freetaxprep.
6. Start preparing early
An important part of learning how to file taxes is to start the tax-filing process in advance.
- The IRS charges interest on whatever is outstanding if you don’t pay your tax bill in full by the April deadline. The annual interest rate is usually around 5% or 6%.
- The IRS may also sock you with a late-payment penalty of 0.5% per month, with a maximum penalty of 25%.
- On top of all that, there’s a late-filing penalty if you don’t file the tax return itself on time. That runs 5% of the amount due for each month or partial month your return is late. The maximum penalty is 25%.
You can get more time to file your tax return by filing IRS Form 4868. But beware: Getting an extension gives you more time to file your return, not more time to pay your taxes. When you file for an extension, make a good estimate of what you owe the IRS and send some or all of that amount along with your extension request in April.
7. Do something about that refund or giant tax bill
Learning how to file taxes also means learning how to manage your tax situation.
- If you end up having to write a giant check to the IRS and/or the state in April, it may be because you’re having too little tax withheld from your paycheck during the year.
- Likewise, if you end up getting a giant refund in April you may have had too much tax withheld from your paycheck during the year. Refunds may seem great, but think about what life might’ve been like if you’d had that money all year instead for groceries, gas and car repairs, monthly credit card payments or other bills you have to pay.
Avoid the big swings by adjusting your W-4 — the form that tells your employer how much tax to withhold from each paycheck. You can change your W-4 any time.
Finally, if you’re expecting to get a refund and want the fastest turnaround, file your tax return online and have your refund deposited directly to your bank account. The IRS says it will issue most refunds within 21 days, but many filers receive federal refunds within 10 days.
More ways to pad your bank account
Once you’ve filed taxes, consider these additional ways to save or earn cash.
Refinance student loans: Graduates with solid income and good credit — at least in the high 600s — may qualify for student loan refinancing. That means a private lender pays off your current loans and replaces them with a new one at a lower interest rate.
Is student loan refinancing right for you?
Any federal loans will become private, so you’ll lose access to certain benefits. Consider keeping your federal loans separate if you will work in public service or take advantage of income-driven repayment. Refinancing is an option once you’re out of school, and some lenders require a period of full-time work before applying. But keep it in mind if you’re worried about high interest rates now.
Earn extra money: NerdWallet rounded up 26 legitimate ways to earn some extra cash, including freelancing through Upwork, picking up odd jobs on TaskRabbit and delivering meals for Amazon. You’ll find options for online and home-based work, plus offline side gigs such as making deliveries.
Lower your bills where you can: Cable television and Internet service providers offer lots of discounts, if you ask the right questions. NerdWallet can negotiate those bills for you.