If this is your first time filing your taxes as a newly independent adult, the entire process can seem confusing. The following are five mistakes to avoid so you can ensure tax time goes as smoothly as possible.
1. Procrastinating Your Taxes
Don't put off your taxes to the last minute, or you might find yourself unnecessarily stressed out as you run up against the deadline. In most cases you should have your necessary documentation from employers and financial institutions by the end of January each year. Plan to file your taxes once all of the documentation arrives so that you have some extra time in the event you run into some filing challenges.
2. Being Unaware of Your Filing Status
Your filing status may seem straight forward, you are either single or filing jointly after all. For many young adults, though, the answer isn't that simple. You may still be a dependent on a parent or guardians taxes, especially if you still live at home or are a full time student. Make sure that you know your status before you file, which may mean talking to your parents to see if they are still claiming you on their taxes.
3. Missing Important Documents
Most people are aware that they can't file taxes until they receive their tax forms from their employer, but there are other forms you may also need. Your bank as well as certain financial institutions, such as mortgage lenders, will also send you tax forms. If you are a student, you may get interest or tuition statements that need to be declared on your tax form. Make sure you have all the forms before you sit down to file.
4. Skipping Credits and Deductions
Taxes for most young adults are straight forward, and it may be tempting to skip many of the credit and deduction parts because you don't have children, own property, or have any financial losses to claim. It's important to look this section over, though, as there are often tuition credits or earned income credits that a younger person may be able to qualify for.
5. Taking out a Tax Advance
Don't give in to the temptation to take out a tax advance. These advances work by paying you your tax return amount as soon as you file, minus a hefty fee for the advance company. Yet, if you choose direct deposit on your return you will likely have your tax return in your bank account in a couple of weeks as long as there are no issues. If there are issues and you end up owing taxes, then you would have to pay back that costly tax advance you took out anyway.
Contact a tax preparation service for more help so you can avoid these five mistakes.