Filing taxes on on your own for the first time? Here are 5 things to know.
There are certain firsts in life that can be daunting, like buying your first car, renting your first home, and filing your first tax return. If you're about to tackle the latter task, here are five essential things you should know.
1. There's a good chance you can do your taxes yourself
You might assume you'll need to go out and hire a tax preparer to complete your return. But if your tax situation is simple, there's really no reason to pay those fees. You may, depending on your circumstances, be eligible to file your taxes for free or at a low cost by tackling the job solo.
How do you know if you can handle your own taxes? If you're a salaried worker who didn't earn any outside income, then calculating your tax liability shouldn't be too difficult. And if you're planning to claim the standard deduction rather than itemize (which is likely the case if you don't own a home), then you're probably equipped to do your own taxes.
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2. It pays to file electronically
You can file your tax return either on paper or electronically using software. It really pays to go the latter route.
When you file taxes electronically, you're less likely to make math errors that could delay the processing of your return and refund. Also, the IRS commonly issues refunds for electronically filed returns in half the time it takes to issue refunds for paper returns.
3. You won't get your refund right away
The typical turnaround time for tax refunds is three weeks from when you file an electronic return and six weeks from when you file one on paper. But your refund may be subject to further delays if you make mistakes on your taxes, because the IRS will need to reconcile those before sending you your money.
You can expedite your refund by signing up to have it deposited directly into your bank account, as opposed to waiting for a check to arrive in the mail. Make sure to put in the correct bank account and routing number. If you botch those details, your refund will get bounced back to the IRS, and it may then take quite a while to get it into your hands.
TAX REFUNDS: Average check is $2,201; $9.5 billion total issued so far
4. There's no penalty for being late if you're owed money
Taxes are due this year on April 18, and the sooner you get your return done, the sooner you can expect your refund to arrive. But if you can't complete your taxes by April 18 and you're owed money, don't panic. The IRS actually won't penalize you for being late with your taxes when it owes you money. It's only when you owe money that being late is a big problem.
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5. You can request an extension if you need more time
If you owe the IRS money on your 2021 taxes and you don't get your return in by the April 18 deadline, you'll face a failure-to-file penalty that equals 5% of your unpaid tax bill for each month or partial month you're late, up to 25%. That can add up to quite a lot of money, even if you're only a month or two late.
If you need more time to get your taxes done, the good news is that the IRS will give it to you. All you need to do is request a tax extension by filing Form 4868 by the April 18 deadline.
To be clear, you don't need to provide the IRS with a reason why you need extra time. All you need to do is get that form in, and you'll get an extra six months to get your return completed.
That said, a tax extension won't give you extra time to pay your tax bill. If you owe the IRS money and don't pay by April 18, you'll start to accrue interest and penalties on that sum until you make that payment. But with an extension in place, you'll avoid that separate failure-to-file penalty.
You may be nervous about the idea of filing your first tax return. But rest assured the process actually isn't that complicated. If you carve out plenty of time to organize yourself and get the job done, you may end up being pleasantly surprised at how easy it is.
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