Is this is your first time filing taxes as independent? If it is, you may be wondering how to file as an independent. Most people find the thought of filing taxes highly stressful. This is mainly because they worry they may be audited or have to pay a tax bill. While you have to make sure you don’t make any mistakes, the process itself isn’t very complicated.
Here’s what you need to know about how to file as an independent on taxes, from the requirements to the process itself.
5 Important things to know when filing taxes as an independent for the first time
Before discussing the requirements to file as independent on taxes, it helps to understand the basics of how it works. These are the 5 most important things you need to know.
1. You must file a tax return if your annual income is above a certain level
Legally, you must file a federal income tax return if you’re single and your gross income is $12,550 or more in a year. This includes income from all sources such as part-time gigs, rental property, investments and interest earned on savings.
If you work one job only, you’ll find the ‘year to date’ income on your pay stub. This will tell you if you earn more or less than $12,550 annually. If you work two or more jobs, you’ll need to check each one individually and add them together as total annual income.
If you’re a college student, you could be earning income in all sorts of ways. For tax purposes, you need to report all of them. Taxable income for students generally comes from wages or salaries. It also comes from tips or money you earn from a side-gig. In some cases, even your scholarship is taxable.
2. You may be able to avail of certain credits and deductions
You may have to reveal your total income but you don’t have to pay taxes on every dollar you earn. The amount of income tax you owe is based on your total income, minus any allowable deductions. Deductions are specific expenses that the IRS allows taxpayers to subtract from their total income for the year. Once all deductions are taken, the remaining income—also known as “taxable income”—is taxed at a determined rate. Almost all taxpayers are eligible to take a standard deduction. If you are filing as single, your standard deduction is $12,550.
If this is your first time filing taxes as independent, you must take the time to understand which credits and deductions you may be eligible for. This will ensure that you get back the maximum amount allowable as a tax refund.
For example, you can deduct up to $2,500 in interest payments on your student loan interest. This is subject to your modified adjusted gross income, which is income minus certain tax deductions
Are you self-employed or have a freelancing side-hustle? You may be able to claim deductions for work-related expenses such as software subscriptions and other supplies.
You can also deduct qualified charitable donations if you donate any money to charity. This is subject to certain conditions, such as itemizing your taxes.
3. You MUST file an income tax return to get a tax refund
Technically, if you’re single and you earn less than $12,550 in a year, you’re not required to file a federal income tax return. But here’s the thing: if you have a job and money is being withheld from your paycheck for income taxes – or if you qualify for an education tax credit – you may be entitled to a tax refund. That means money back in your pocket just for filing your taxes. Filing your taxes doesn’t necessarily mean you will owe taxes particularly if your annual income is less than the taxable minimum. But one thing is for sure: you won’t get your refund if you don’t submit a tax return.
4. You can’t claim education tax credits if you are a dependent
When you file your tax return, you will be asked, “Can anyone else claim you as a dependent?” If the answer is yes, you should still submit a tax return, but your dependent status will limit which tax credits you are eligible for.
The American Opportunity Credit and the Lifetime Learning Credit are two tax credits offered exclusively to qualifying college students. If your parents claim you as a dependent on their tax return, they could take the tax credit. If they don’t claim you, then you could take the tax credit.
So how do you know if you are a dependent? If you are 24 or younger, enrolled in school full-time, or someone else provides more than half of your financial support, you could be claimed as a dependent. Make sure you know if anyone else is claiming you before you fill out your tax return.
If you think you may qualify for additional credits or deductions, check the IRS website. Learn more about Work Study Programs and Taxes if you’re a student availing of work-study.
5. There is a deadline for filing taxes for the year
Yes, there is deadline for filing federal individual income tax. The due date is usually April 15 of each year. If you don’t file your taxes by the due date, you’ll have to pay a fine. And the fines can be pretty high.
To make sure you have everything ready to submit before the deadline, it’s a good idea to start early. It can take time to put together all the documents you need to submit. Then it takes even more time to calculate total income, qualified deductions, and taxable income. If you start only a few days before the deadline, you’re sure to make mistakes that could cost you.
As a general rule, it’s better to file your tax returns earlier rather than later. The earlier you file, the earlier you’ll get any refund that’s due to you. Start working on your taxes by early March. This gives you sufficient time to get everything done properly without getting stressed.
Requirements to file taxes as independent
When you file a tax return, you’ll need to provide certain personal information. Some of it you probably already know, like your Social Security number. Other information will have to come from your employer, your school, or your bank. We said it before and will say it again – getting all the documents together takes time. Make sure to start early.
The IRS website has the full list of forms and instructions. Go through it to determine what’s applicable to you so can make sure you have the necessary forms by the deadline.
FORMS to file taxes as independent:
- Form W-2 if you’re employed: If you work as an employee, you should receive a Form W-2 from your employer in January. If you work multiple jobs, you will have more than one W-2 form – one from each employer. You will need to collect all of them before you begin filling out your tax return. If you haven’t received any, make sure to ask and get one.
- Form 1099 if you’re self-employed: If you have a side hustle and are paid as a contractor, you will get a Form 1099 that includes your income information. Side-hustles includes any type of part-time gig such as freelancing or a service-based business.
- Form 1098-E for student loans: If you have student loans, your bank (or other financial institution) should send you a Form 1098-E with your necessary tax information.
- Form 1098-T for school payments: If you make payments to your school, they should give you a Form 1098-T with a list of the expenses that are related to your coursework. You can use this information to determine if you are eligible for the Lifetime Learning Credit or American Opportunity Tax Credit.
Additional Forms and Documents
In addition to filling the applicable forms, you’ll also need to submit documents to support your claims. Depending on what you’re claiming for, you may need to submit medical bills, bills for work-related expenses, and receipts for charitable donations. If you have investments or any type of student financial aid, you’ll need statements for each. It helps to save all relevant paperwork throughout the year and keep it in one place. That way you have it all ready to go when you start working on your taxes. It will help speed things up and you won’t feel so overwhelmed.
So you know what’s involved with filing taxes as an independent for the first time. You also know the requirements to file as an independent. Now you’re ready for that last step – the process of how to file as an independent.
How to file as an independent – The process
The IRS offers several options for individuals to file their tax returns. You can choose from any of these options depending on which one works best for you. Most of these are pretty straightforward even if this is your first time filing taxes as independent. And if you run into any problems, there is help available.
Option 1:
The first option is the Free File option. This is for you if your adjusted gross income is lower than the specified minimum. The free file is a free tax prep software. It has inbuilt calculators and other features that make it easy for you to determine applicable deductions and to prepare your tax returns.
Options 2:
The second option are the IRS online forms. This is for you if your adjusted gross income is higher than the specified minimum. The IRS online forms are basically electronic versions of the paper form. They offer basic guidance on what you need to do and will even perform the necessary calculations. This may or may not be enough for someone filing taxes as an independent for the first time. Only you can make that decision.
Option 3
Tax preparation software, which is the third option, offers a little more guidance than IRS online forms. You will need to pay a small fee to use the tax preparation software. But if this is your first time filing taxes as an independent, this tool will give you the extra help you need. The tool walks you through every step of way on how to file as an independent. It also helps you determine and calculate how much deductions or credit you may be able to claim.
Option 4
The last option, tax preparer, is for anyone who needs one-one-one help with filing their taxes. A tax preparer could be an account or a tax preparation firm that specializes in tax returns. It’s best to use a tax preparer who is verified by the IRS. You will be giving this person or organization access to your financial information so you want to make sure they are completely trustworthy. Getting one-on-one help from a tax preparer is the most expensive of all options but it’s better than making a mistake on your tax forms.
Why you should consider e-filing your taxes
There are several advantages to e-filing your taxes. In fact, even the IRS would prefer that everyone file their taxes online. When you e-file, your return is submitted instantly. There is no risk it will be lost in the mail, and there are fewer simple errors because the program does your math for you. When you e-file with TaxSlayer for the first time, you’ll enter all your current tax information. When you come back to file the next year, your prior year details will still be saved in your account. That’s easy! And you don’t need to be a tax genius to do your taxes correctly. TaxSlayer’s products guide you every step of the way, so you can feel confident even the first time around.
Avoid making simple mistakes when filing your taxes
One of the most common mistakes people make when they file their taxes is forgetting to sign and date their return. It’s not the end of the world, but it will take longer for you to get your refund. If you mail your return but you forgot to sign it first, the IRS will send you a letter requesting your signature. They can’t process your return without it.
Falling for an IRS scam is another huge tax-related mistake. If the IRS needs to contact you, they will send a letter through the U.S. Postal Service. They will not email, text, or reach out to you on social media. Do not give out any details if anyone contacts you by phone, email or social media and asks for any personal or financial information. Tax-related scams are very common especially around the tax filing deadline. Be careful and vigilant, and you’ll slay your taxes without becoming a victim of tax fraud.
