This blog is for those who have just begun their career and are about to receive their first paycheck. Pay attention because you are going to receive another from that goes by the name W-2 from your employers, and you will suddenly be introduced to the whole new world of taxes.
Don’t worry if this is the case because we have laid out all the things you should know about filing taxes for the first time. Have a look.
You don’t need to pay anything if you earn less than $12,200
There is an income threshold that lays the amount of salary equal to or below it you are not liable to pay any taxes. Therefore, if you earn $12,200 annually and you are single, then you are not liable to pay any taxes. Same way, you will not have any tax implications if you are married, and your collective income is equal to or below $24,400.
Why should you file a tax return even if you don’t owe any taxes?
Just because you don’t fall into the income slab to pay taxes doesn’t mean you shouldn’t file a federal income tax return. If federal income taxes are withheld from your paycheck by your employer and your tax bill is zero, then filing the returns can earn you a great tax refund.
Another benefit of filing tax returns is receiving earned income tax credits, which provides tax refunds to U.S. citizens earning low-to-moderate income and who meet certain laid- out requirements.
Another place where you would need to file a return is when you are self-employed. There are many permutation and combinations, but you can find out if you should file a tax return or not by using the IRS tax filing tool available on their website.
Details required to file tax returns
Filing tax returns would require you to possess specific details like your name, address, and Social Security Number (SSN). You will also need to collate all the forms provided to you by your employers and any organizations that paid you interest or dividend. The majority of such forms are called Form W-2 or Form 1099. If you have any other type of income like from real estate or trusts, then you would need to gather all the information about how much you received during the tax year. These proofs could include year-end statements or bank statements of earnings.
In case you work in the gig economy
There’s an ongoing trend of doing something of your own or working part-time or as a freelancer in the gig economy. The most important thing you need to keep in mind is making a list of all business deductions to maximize the chances of receiving a potentially higher refund.
For example, if you work with a ride-sharing company, then you can claim business deductions on mileage expenses. If you also wore a uniform, then you can deduct the cost of buying and cleaning the uniform. If you have let out a part of your home, then you can claim deduction on expenses incurred on that part of the house.
The Bottom Line
Filing your taxes for the first time might seem like a big and dreadful thing, but it’s not. For those who do not earn above the income, the threshold can earn exciting refunds and also earned income tax credits on meeting specific criteria. Those who do earn above the income threshold can get deductions and credits on their eligibility for certain factors. Being aware and understanding the basic tax framework helps to be ready and confident about filing taxes. If you feel you still need an in-depth discussion to understand your tax liabilities and get them filed, then you can contact your MyTaxFiler experts and get all the information and guidance you need.