Getting your first job out of high school or college is exciting. However, what is less exciting is filing taxes for the first time. The process of filing your taxes can be very confusing and, unfortunately, it can cause several first-time filers to make serious mistakes that can cost them a lot of money. If you are filing your taxes for the first time, here are a few basic mistakes you need to avoid.
Choosing the Wrong Filing Status
Determining your filing status is critical because it impacts the number of deductions you can take and ultimately the size of your tax refund, or how much you will end up paying to the IRS (Internal Revenue Service). There are five separate filing statuses: single, married filing jointly, married filing single, qualifying widows or widowers, and head of household.
If you are unmarried and do not have any other children or dependents, you will file as a single person. However, if you have qualifying dependents and meet certain criteria, such as paying over half of the expenses of your home or your dependent is the qualifying resident of your home for the majority of the year, you can file as head or household.
There are several tax benefits to filing as head of household over a single person, so make sure you file correctly.
Filing Your Taxes Too Early
The IRS begins accepting most tax returns in the first few weeks of the year. However, in a rush to get a tax return, some first-time filers will accidentally file their taxes before they receive all the information required to file a complete return. For example, if you purchased a home, you will receive tax documentation to deduct your mortgage interest or mortgage insurance.
If you have more than one job, you also need to wait until you receive all of the tax documentation from these employers. Filing too early can mean missing out on deductions or you could have to go through the hassle of filing an amendment down the road.
Filing Your Taxes on Your Own
Finally, one of the most common and potentially devastating mistakes you can make as a first-time filer is to try and navigate the tricky world of tax preparation on your own. Instead, look to a professional accountant to help you ensure you are filing under the right status and are getting all the deductions you are entitled to.
When it comes to filing your taxes for the first time, there are several common mistakes you should avoid. Contact an accountant to help you with your tax preparation.