If you make less than $54,000 per year, you can use the IRS Free File site directly Online filing, free.
Or you can try the free version of the TaxACT program.
One of the biggest mistakes filers make is going straight for the one-page 1040EZ form.
A lot of people might have student loans, and they can deduct the interest on the form 1040A or the long 1040 form.
Those
who earn less than $65,000 a year can take up to $2,500 off their AGI
for the interest (not the principal) paid annually on student loans.
This counts for both federal and private student loans. If you're still
enrolled in a qualified higher education institution, you can also
claim a HOPE tax credit for up to $1,650 for your tuition and fees.
These are "above-the-line" deductions, meaning you don't have to itemize them (break them down, rather than taking the standard deduction) to claim them.
Another surprising above-the-line deduction: the expenses for your first big move and first job.
"Let's say you got out of college at New York State, and you're
moving to take a job offer down in Atlanta. Be sure to keep a record of
your U-Haul and moving expenses." All of this can be written off on the
1040 Long Form only.
After your first job, you can deduct job-hunting expenses like
resume prep when you look for another position in the same field, but
you have to itemize to take these deductions.
Lots of younger workers are starting out as freelance,
permalance, or independent contractors. If you're getting paid on a
1099 instead of a W-2, you need to fill out a Schedule C form to
itemize your business expenses.
Here, take your time and be thorough. For example, don't forget
home-office expenses -- you can deduct a proportion of your rent,
Internet, and utilities if you work from home (although your work area
should be exclusively delineated and reserved for work).
Also, you can deduct your premiums if you buy your own health insurance -- which you should!
This year, I went through my online calendar month by month to
remember all the dates where I incurred business-related travel or
entertainment expenses (e.g., lunch with an interview subject). My
Amazon account showed what books I'd bought for research, and my cell
phone bills served as a log, allowing me to figure out the percentage
of calls that were made to business-related numbers.
Experts also suggest using online mapping tools to reconstruct your
mileage if you drove anywhere for work. Of course, you should be able
to back up every deduction with a receipt.
Another important thing to remember: If you are a freelancer and
taxes are not being taken out of your paychecks, you must file
estimated tax payments each quarter. If not, "you're technically in
violation of tax law."
You have funded your tax-sheltered retirement account. If it's a
Roth IRA or Roth 401(k), you still have to pay taxes on your
contributions (with the advantage of taking the money out tax-free when
you retire). But if your employer offers a regular 401(k), those
contributions will reduce your tax liability.
Another employer-provided tax benefit that people often overlook is
a flexible spending account for medical expenses. Put, say, $500 into
it for your co-pays and dental deductibles -- even over-the-counter
medications -- and you can take that amount off your taxable income.
There are certain times when younger filers should seek help from a qualified
CPA. You may want to do this if you've started your own business, sold
some property, or have a large amount of investments, all things that
will make your tax filing more complicated. Or, "if you're just too
danged busy and you're going to be rushed. You never want to get in a
rush when you're doing your taxes."
Everyone
knows that a fat refund is your reward for going through the
mind-numbing process of tax filing, right? Well, think again. A
"refund" just means you let the government hold on to too much of
your income all year, like giving them an interest-free loan.
"If you find you're getting a large refund, go to your human
resources office and fill out a new W-4, you want to have just as close
to what you're going to owe taken out as possible."
Another refund pitfall: If you walk into a tax-prep chain, watch out for any
refund anticipation loans they offer. They'll cost you a bundle in the long run.