Updated for Tax Year 2015 (for returns filed in 2016)
If you're new to taxes they can be quite intimidating. Confusing language. Fear of getting in trouble with the IRS. Math. Don't worry, it's really not that hard. In our Beginner's Guide To Taxes we'll tell you everything you need to know to file your taxes and get a nice refund. Fast.
This guide has 4 sections:
1. Do I have to file?
2. What paperwork and information do I need?
3. How do I prepare and file my tax return?
4. How do I get my refund?
1. Do I have to file?
The short answer – if you made any money, you should file a tax return even if you’re not required to. Why? To get a refund! Most likely income tax is being withheld from your paycheck. Often too much. File a return and get some of your money back! Even if you only worked for a month and only made a few bucks, file a tax return. Besides the money in your pocket, better safe than sorry. The last thing you want is to get in hot water with the IRS.
You may also be eligible for valuable tax credits like the Earned Income Credit, which can give you a refund even if you didn't have taxes withheld from your paycheck. Still not convinced? Read more about filing requirements.
2. What paperwork and information do I need?
Besides basic information about yourself (name, address, date of birth, etc.), your spouse, and your kids, you'll receive tax forms in the mail from your employer and any banks you do business with. The most common of these forms are:
- A W-2 from your job that reports the salary, wages, and tips you made. Your employer must mail your W-2 by February 1, 2016. Many employers offer electronic versions via the same website you can view your paycheck stubs. If you worked more than one job during the year, you’ll receive a W-2 for each one.
- If you received any unemployment income, you’ll get a 1099-G from the state that paid you.
- If you made $10 or more in interest from a checking or savings account, your bank will send you Form 1099-INT, otherwise you can use online banking or your account statements to determine the interest you made.
There are less common forms you may receive as well. They'll be mailed by early February at the latest. Don't worry, we'll remind you about this stuff while you're doing your taxes, so get started with confidence whenever you're ready.
3. How do I prepare and file my tax return?
You have three options:
Pen and paper
The old school way to do your taxes is with pen and paper. It takes a while and some tax knowledge, but you can’t beat the price. Determine the forms and schedules you need, download them from the IRS, print them, and get cranking. Once you're done, mail your completed return to the IRS along with your W-2 and a check (if you owe additional taxes).
Pay someone else to do it for you
You can hire a CPA, EA, or go to a tax store and pay someone to do it for you. It’s much less effort on your part, but it isn't cheap. Prices start at around $100, most people pay $200 - $300. If you have complicated finances it can cost even more. They send your return and the needed paperwork to Uncle Sam for you.
Do It Yourself With Your Phone or Computer
Online tax software has revolutionized the tax preparation industry. Today's software has an "interview" format - it asks you a series of questions and creates the right tax forms based on your answers. It does all the math for you, puts the numbers in the right places, and checks for mistakes, ensuring you get the biggest refund possible. Once you're done, your return is filed electronically with IRS e-file.
We believe TaxAct is the best software on the market. Try it for free and don't pay until you're happy.
4. How do I get my refund?
Most taxpayers get a refund. A nice one, too. The average is around $2,700! As you're filing your return you'll chose to either have IRS cut you a check or direct deposit your refund into your bank account. Direct deposit is significantly faster, so we recommend it.
If you owe the IRS additional taxes, you can write them a check, or they can withdraw the money from your bank account electronically.
That's all there is to it. It's really not that bad. If you can get online, you can do your taxes yourself with software. And if you're reading this, you're online so...
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