What Do First-Time Tax Filers Need to Know?

Not many people actually enjoy filing their income tax returns, but for first time tax filers, the prospect of sitting down and preparing their tax return is especially stressful. That can lead to procrastination, as the deadline draws nearer and nearer, and the pressure mounts. If you’re starting to panic a little just reading this paragraph, stop and take a deep breath: we have lots of good news for you.

First, if this is your first time filing taxes, chances are that your return will be a simple one. Second, changes to technology and the tax laws have made filing simpler than ever before, especially for first time tax filers. And third, there is plenty of good help available if you need it—and if you know where to look. Hopefully, that information, and the tips for first time tax filers below, will help to make tax time worry-free.

Tips for First Time Tax Filers

Here’s what to know about filing taxes for the first time:

Figure out if you actually need to file.

That’s right—you might actually be able to avoid filing taxes if you didn’t have enough income. For tax year 2023, a single person didn’t have to file a tax return if their gross income was less than $13,850. Even if your gross income is below the threshold, you may still have to file if you have more than $1,250 in unearned income, such as interest income. If you’re not sure if you have to file, check with a tax professional.

Gather the documents you will need to get started.

If this is your first time filing taxes, you are probably in your teens or twenties. That means you might not remember your parents sitting up late, surrounded by calculators, shoeboxes full of receipts, and paper forms. Good news! Things are going to be much easier for you. It’s likely that many of the tax documents you will need are available electronically, such as:

  • W-2 (Wage and Tax Statement from an employer)
  • 1099 (record of income received as an independent contractor, freelancer, or from other non-employment sources, such as interest or dividends, or from third-party platforms like Venmo)

If you have income from other sources, it may be reported on other forms, but for most people, their income is reported on a W-2, a 1099, or both. If you have multiple jobs or clients (such as driving for both Doordash and Lyft), you may get multiples of these forms.

Check your email inbox and your regular mailbox. Most of these forms are sent out by January 31, though they may arrive later. If you didn’t get yours, check with your employer or client.

Find out if your parents or someone else can claim you as a dependent on their tax return.

You will still need to file a tax return if you meet the income thresholds. But you will also need to indicate on your return whether someone else can claim you as a dependent. If you are under 19 and living in a parent’s house for more than half the year, or under 24 and a full-time student, you may be a “qualifying child” who can be claimed on a parent’s (or another adult’s) tax return. If you don’t meet the criteria for a qualifying child, you might still be a “qualifying relative.”

Decide whether to take the standard deduction or itemize—and don’t forget about tax credits.

First things first: a little vocabulary lesson. A deduction reduces the amount of your tax by reducing the amount of income on which you must pay tax. If you have $30,000 in income and $5,000 in deductions, your taxable income is $25,000.

A tax credit is different; it reduces the amount of your tax directly. If you owe $2,000 in taxes, and have a $500 credit, you now owe only $1,500 in taxes. Better still, some tax credits are refundable, meaning that they can reduce your taxes below zero, resulting in a refund.

Everyone filing taxes has to choose between taking the standard deduction and itemizing deductions. Most first time filers take the standard deduction, which was $13,850 for tax year 2023. You would itemize only if doing so would give you a large enough deduction that would make the extra work of itemizing worth it—say, if you paid a lot of mortgage interest, had significant medical expenses, or made tens of thousands of dollars in charitable contributions.

That’s not the case for most first-time filers, but if you wonder if you should itemize, contact a tax professional. If you do itemize, you will need to be able to document your deductible expenses through receipts, credit card bills, or other means. Even if you claim the standard deduction on your tax return as most first time tax filers do, you can still claim many tax credits like the Earned Income Tax Credit (EITC) or the American Opportunity Tax Credit.

Take advantage of technology and prepare (but not necessarily file) your tax return as early as possible.

Many first time tax filers can file their taxes for free online. If this is an option for you, great! You could be done filing your taxes in well under an hour. If you are filing taxes for the first time, it’s likely that you may qualify for a tax refund. The only way to know for sure is to prepare your return. If you do qualify for a refund, filing early and online means that your refund will probably reach you sooner.

If it turns out that you owe taxes, preparing your return early is still a smart move. Knowing what you will owe gives you time to save up a tax payment if you need to—just don’t hit “send” on that return until closer to tax day. If you owe a significant amount, consider adjusting your income tax withholding from your employer so that you don’t have to pay again next year.

Preparing your taxes early also lets you find out if you have any obstacles to completing your return. There’s nothing worse than doing your taxes on April 15, only to figure out you’re missing a needed document or have a question you can’t get answered. If you prepare early and sail through completing your return, you get peace of mind. If you discover a problem, you still have time to get help.

The Bottom Line

Filing taxes doesn’t have to be a burden, and you don’t have to do it alone. If you need advice about filing taxes for the first time, schedule an appointment today with the accounting and tax preparation professionals at Gudorf Tax Group.