Contributed by: BreeS, FreeTaxUSA Agent
Filing your taxes for the first time can seem like a daunting task. You likely have many questions: What if I do something wrong? Will I be audited? How much will I owe? Will I get a refund? We’re here to help answer these questions and build your confidence as you gear up to file.
Before you begin, we recommend having all your tax documents together so you don’t have to file an amended return later to fix something you missed. This may seem like a simple step, but you’d be surprised how many people need to amend their return because they missed a document.
What kind of income do you have?
The type of income you have determines how you report it. Most first-time filers don’t yet have income from other sources, like retirement accounts or Social Security. For this article, we’re going to address the two most common types of income for first-time filers. Are you an employee with wages reported on Form W-2 or do you have self-employment or contract income reported on Form 1099-NEC or 1099-MISC?
Wage employee
If you’re a wage employee, your income is reported on a W-2, which typically shows the federal, Social Security, and Medicare taxes already withheld from your wages. Receiving a W-2 is usually the most straightforward way to report income. Entering a W-2 in FreeTaxUSA is simple—you’ll match the boxes on your W-2 to the corresponding boxes in the software. You can also import a PDF of your W-2 so you don’t have to enter the information manually. If you have more than one job, you can add as many W-2s as you need.
1099 independent contractor
If your income is reported on Form 1099-NEC or 1099-MISC, the process of reporting this type of income can be a little more complex. You may be thinking, “Why am I reporting this as self-employment income when I worked for someone else?” Receiving one of these forms means you weren’t classified as a wage employee, so federal, Social Security, and Medicare taxes haven’t been withheld from your pay. Consequently, this income is treated as self-employment income and taxed a little differently.
In FreeTaxUSA, you’ll enter your 1099-NEC or 1099-MISC in the Business Income section, and your return will likely include self-employment taxes. When you enter the form, you’ll need to link it to a Schedule C, as that’s the schedule used to report this type of income on your return. The software will guide you through that process.
This part of the software can feel stressful if you weren’t expecting to file a Schedule C for self-employment income. Rest assured, this is how nonemployee compensation on Form 1099-NEC or 1099-MISC should be handled. You can also deduct any business-related expenses in this section of the software to help reduce your taxable income.
Other types of income
Most first-time filers don’t have other types of income yet, such as investment, retirement, Social Security, or foreign income. If any of these apply to you, we do have resources to help you report them. You’ll see these options in the Income section of the software.
What kind of deductions/credits do you have?
Deductions
Once you have your income sorted, the next step is to work through your deductions. Most first-time filers don’t have enough qualifying expenses to make itemizing deductions worthwhile, so you’ll typically use the standard deduction instead. The standard deduction is a fixed dollar amount based on your age and filing status.
Credits
Tax credits are less common for first-time filers, but some may still apply to you. For instance, depending on your income, you could qualify for the Earned Income Tax Credit (EITC). If you’re in college and paying tuition, you may have received Form 1098-T reporting the tuition you paid, which could qualify you for an education credit. FreeTaxUSA walks you through the filing process and prompts you to enter information for any credits you may qualify for.
Calculating your income, deductions, and credits makes up the bulk of filing your taxes. If you can nail down these sections, you’ll build the foundation for a solid tax return.
What about your state return?
States generally mirror the IRS in the way they report and tax income. If you’re a first-time filer, your situation is likely simple, meaning you may not need much extra information for your state return. One increasingly common issue worth being aware of, though, is how states tax remote employees. Because regulations vary from state to state, check how your specific state handles remote work if you work from home.
Now to address those questions keeping you up at night
What if I do something wrong?
If you forget a document or find another deduction after filing, you can generally file an amended return to make any needed corrections. Keep in mind, though, that you must file the amended return within 3 years after the date you filed your original return, or 2 years after the date you paid the tax, whichever is later.
Will I be audited?
The chances of being audited as a first-time filer are low, but FreeTaxUSA customer support is here to help if you have questions about the calculations on your return. Often, the IRS will send you a notice if they need additional information. This is not an audit, and we can guide you through the next steps to address what the IRS is asking for. For added peace of mind, we also offer Audit Defense, which gives you access to licensed professionals who can walk you through the audit process if one does occur.
How much am I going to owe?
As a first-time filer, you may owe taxes. It just depends on your income and your amount of federal withholding. If you’re a wage employee with a W-2, you’ll likely owe little to no additional tax because your withheld taxes should match your income and filing status. If you’re a 1099-NEC or 1099-MISC independent contractor, you may owe taxes if you didn’t make any estimated tax payments during the year.
Will I get a refund?
Your outcome depends on the amount of withholding from your paycheck and any deductions or credits you may qualify for. While everyone wants a refund, receiving one—unless it comes from a credit you qualify for—usually just means you overpaid your taxes during the year. Ideally, your amount owed or your refund amount should be as close to zero as possible to optimize your take home pay throughout the year.
Final filing steps
E-file
You’ve now completed your return, and it's time to file. If you’ve never filed a tax return before, you can generally still e-file—you’ll just need to select that option as you go through the final steps before submitting your return. However, if you’re under age 16 and filing for the first time, you may not be able to e-file and might need to paper-file your return instead as the IRS has restrictions on e-filing for first-time filers under the age of 16.
Extensions
If you need more time to submit your return, you can file an extension through FreeTaxUSA before the April 15th deadline. Keep in mind an extension only extends your time to file your return—it doesn’t extend your time to pay any taxes owed. Taxes you owe must still be paid by the original deadline to avoid penalties and interest.
In conclusion
Filing taxes doesn’t need to be a scary thing. FreeTaxUSA makes it simple and affordable for you to file a tax return, walking you through the steps of entering your information and generating all the tax forms you need. Hopefully, you can now sleep better at night knowing you’re fully capable of filing your taxes for the first time. If you have questions along the way, you can always reach out to our Customer Support team within your account. You also have the option to add Pro Support for access to tax advice from licensed professionals.
