Joe’s Expert Beacon Post: Advice for 18 year olds filing their taxes on their own for the first time

eb_large

Happy-Clients-for-website

You are not a kid anymore. You now have to do your own tax return. No matter if you are 18 or 30 years old, if you are filing your taxes for the first time, it is important to educate yourself about the tax laws so that you know how to file your federal and state return correctly and on time, while also maximizing your deductions so that you can pay as little as you can to the government. Here is some advice to help.

The Do’s:

Do #1
Title: Do get a copy of your wage and income transcript from the IRS
Body: It is never too late or too early to start your own file of what the IRS has on you. A simple phone call to their 800# for automated collections will put you in touch with someone who can mail you a copy for free. This way you know what the IRS has on you so you can use it on the tax return.

Do #2
Title:Do list all the transcript information on the return
Body: All the information on the wage and income transcript should be listed separately on the tax return. Some information does not go on the return at all. You must understand the nature of each item and how it is treated on your tax return. Make sure you understand any school related items such as student loans, grants, tuition, room and board etc. and how they are treated on your return. Many general rules do not apply.

Do #3
Title: Do file an extension before April 15th
Body: Filing an extension before April 15th will allow you to file your tax return right before Oct 15th to help avoid an audit.

Do #4
Title: Do make yourself aware of the rules if your parents claim you as a dependent
Body: You may have certain deduction limitations because of your parents claiming you as a dependent. Your parents may have also elected to include your income on their return. Talk with your parents and make sure you know what they have done before you attempt to prepare your return.

Do #5
Title:Do seek out a qualified tax preparer such as a professionally licensed CPA
Even if you took a tax course in school, the laws can be confusing. It’s also important that someone with years of experience reviews the return and advises you on how to get records from the IRS and how to document the return, etc. There are important unwritten procedures to use to protect you from an audit or an inaccurate return. Contact a professionally licensed CPA to help you file your tax return correctly.

The Don’ts:
Don’t #1
Title: Don’t rush the return trying to file by April 15th
Body: That is the date picked by the IRS for when they want it in. You are allowed to get a free extension of time until Oct 15th. Use it to avoid an audit. Use it so you can wait past September when the IRS will have all the wage and income transcript information. Remember that you need to match it on your return. You can’t do that if you file before April 15th

Don’t #2
Title: Don’t assume that you don’t have to file if you are under a certain age
Body: Child actors that are 3 years old for example, file returns if their income is high enough. Your age is not relevant in deciding whether or not you have to file. If you earned income, especially income reported to the IRS, you should file a tax return, usually IRS form 1040.

Don’t #3
Title: don’t take advice from people who try to tell you that you don’t have to file
Body: There are many groups who will be happy to give you references of IRS documents, the U.S. constitution, etc. trying to use logic to convince you that you don’t have to file a return. The IRS is pretty set in their thinking. All of these methods are not valid. The IRS has a list on their website to help people look up each method so you can see for yourself that these methods are not a way out of filing and paying taxes. If you don’t file taxes, they may charge you with criminal penalties.

Don’t #4
Title:Don’t go to a tax preparer based on how big your refund or how small the tax liability
Body: There are many tax preparers that get business this way. They will ask you questions and say that you are entitled to many deductions. Your return may look like you are getting all of your federal withholding tax back. Don’t believe it. If you are foolish enough to have a non CPA do your return, then at least make sure you look up each item in a reputable tax guide such as J.K. Lasser’s “Your Income Tax” so that you will understand why it is on your return. This will help you decide for yourself if you want any specific item on your tax return or not.

Don’t #5
Title: Don’t copy the information from a friend’s tax return
Body: Let’s say you and a friend or two work for the same company and have the same expenses, and pretty much the same information. They go to a tax preparer, even a CPA, and get their return done professionally. You want to save money so you just copy the information from that return on to your return. What you will fail to do is understand that each person’s situation is different, and you must have the proof for all of your deductions. You also may be missing other benefits that you have that your friend doesn’t. Your wage and income transcript will be different and you won’t be matching the information to your return properly. It’s too much of a risk.