If you are processing your tax returns for the first time, you must be having butterflies in your stomach. The need for filling so many details must be too scary. What if there is a mistake? You will be bogged down by this thought every time you glance through the form. Cast your apprehensions aside, as we provide you some important tips on how to file your tax return.
- Firstly, find out whether you need to file a return or not. Filing tax returns are based on factors like gross income for the year and your age. However, it is advisable to file even if there isn’t any need to file as you may get a refund of any federal income tax withheld or avail earned income benefits.
- Filing tax returns is a complex process for the first time as it involves answering details about which one may not be aware. The best way out is to follow IRS instructions as available on the website or in its publications. The TaxACT software is built to provide Step-by-Step Guidance to the first time in a very user friendly way. You can get additional information on all that confuses you.
- As a first timer it is very important for you to know the difference between tax deductions and credits. Remember a deduction brings down your taxable income but a credit brings down your tax liability. Credits are of two types: nonrefundable and refundable.
- With a nonrefundable credit your tax liability can come down to nil, but it wouldn’t give you a refund. A refundable credit can raise or lower the amount you owe to the state as tax. You can avail this only if you qualify for it.
- As a first timer it is important to know that filing returns on time matter a lot. There is a deadline to pay tax each year. If you are paying tax for 2012 then the last date to file is April 15, 2013. One can even apply for a 6-month extension, in case there is some problem in filing it within the stipulated times. For this you need to file form 4868 or pay your estimated tax in the TaxACT program.
For the first time it is also important to know the recordkeeping requirements. To learn more about this you need to go through the record keeping information mentioned in details in Part I of Your Federal Income Tax (For Individuals- page 15).