Doing taxes for the first time--Please help!

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ForeverInvestorILL
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Doing taxes for the first time--Please help!

Post by ForeverInvestorILL »

Hello BH's, I am planning to do my own taxes for the first time this year. The last few years my dad has a CPA doing the taxes for everyone in my family. I want to do them on my own to 1. Learn more about taxes for my own benefit and 2. The cost.

Here is a little background on me that I thought would be useful:
Age: 23
State: IL
Total Taxable Income: ~42K (salary, bonus, unused vacation)--I began working full-time in June 2016
Contributed to Roth 401K and Roth IRA (I know neither of these contributions are tax deductible)
Lost about $250 on AAPL shares in ETrade and Robinhood brokerage accounts
Earned about $150 in interest from checking/savings accounts

I've been doing a lot of reading about different tax prep software (TurboTax, TaxAct, HR Block) and all of them seem pretty similar in terms of price/service Does anyone suggest using one of these services versus the others?. I am not exactly sure what "class" (free vs. premium) of these services I would need. I have also read about filing directly through the IRS.gov website and that is completely free. Does anyone have experience with doing this? My credit union is offering a $15 discount off TurboTax products so that is the one I am currently leaning towards using.

Any advice would be very beneficial and I appreciate your time!
mortfree
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Re: Doing taxes for the first time--Please help!

Post by mortfree »

Do you know which 1040 form you have to complete? There is 1040-EZ that should be really simple.

Did you sell aapl and realize the loss? That may decide which 1040 form to use

I will use turbo tax to double check myself but will manually fill in the forms and not pay turbo tax at all.
livesoft
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Re: Doing taxes for the first time--Please help!

Post by livesoft »

May I suggest an even bolder proposal?

Can you do your taxes by reading the Form 1040 instructions and filling out the return with a pencil? That is really the only way you are going to get your first benefit about learning. IRS Publication 17 will get you started. irs.gov has all the forms and instructions, too. Google will find everything.

But after you do that, then you can use tax software before you submit your return by e-file. I will state that tax software actually suppresses any learning. The creators of tax software want you to feel that you don't have to know anything to use their software, so they do not make any attempt to teach you anything.
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mortfree
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Re: Doing taxes for the first time--Please help!

Post by mortfree »

I noticed in December that the 1040 instructions link in the IRS website is still linked to the 2015 document.

Thought that would have been fixed by now.

Or maybe it's just me.
Topic Author
ForeverInvestorILL
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Re: Doing taxes for the first time--Please help!

Post by ForeverInvestorILL »

mortfree wrote:Do you know which 1040 form you have to complete? There is 1040-EZ that should be really simple.

Did you sell aapl and realize the loss? That may decide which 1040 form to use

I will use turbo tax to double check myself but will manually fill in the forms and not pay turbo tax at all.
Yes I sold the AAPL shares this past March. No I am not sure what 1040 form to complete. How do you "double check yourself" using Turbo Tax? Just fill in all your information?
mortfree
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Re: Doing taxes for the first time--Please help!

Post by mortfree »

Yeah plug in your numbers in turbo tax and see what their answer is. Like livesoft said you really need to know how to do the math yourself. You can easily miss something in the software and it won't work like you expect it to. But you'll never know if you don't fully understand the math behind the taxes.

If you are good at spreadsheets you can set one up to help you do your taxes. Have a section for all the inputs. Then another section that looks just like the form with the calcs.

If you get it setup right then you can use it in the future with some changes of course.
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Re: Doing taxes for the first time--Please help!

Post by jebmke »

mortfree wrote:I noticed in December that the 1040 instructions link in the IRS website is still linked to the 2015 document.

Thought that would have been fixed by now.

Or maybe it's just me.
1040gi is now available on IRS site

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
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CAsage
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Re: Doing taxes for the first time--Please help!

Post by CAsage »

Awesome! Nothing teaches like doing it yourself. First, make a list of every financial in/out you had this year (ok, spending money doesn't count but mostly the income!). Every bit of that will generate an official form by the end of January, and you need to collect all of them. Then, figure out where on the 1040 they need to go, and that will point you to the right forms. It all has a home, and it's your job to sort them out and add them up. As to which 'level' of tax software or which 1040/1040A/1040EZ, you can sort that out by simply looking them each up to see what complexities lead to which form. Selling stock probably puts you in the regular 1040 zone. Spend a little time organizing, and it will make sense.
Best wishes!
Edit: Turbotax vs HRBlock Taxcut is a whatever choice. You probably need the high-end consumer (not business) version if you are doing stock sales. Note the IRS provides forms completely for free!
Last edited by CAsage on Sat Jan 07, 2017 9:30 pm, edited 1 time in total.
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Wakefield1
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Re: Doing taxes for the first time--Please help!

Post by Wakefield1 »

It usually takes a long time for some of the forms and schedules you order from IRS and State Dept. of Taxation to show up in the mail. They want you to have a printer or go to the library and use a public computer that is connected to a printer. But I feel like I want the official forms,not smeary copies from the library's printer.
You might have to look up some stuff online (1040 and State instructions) to figure out what schedules you need-like the one used to donate part of your refund to the Nongame Wildlife Fund or State Forests Fund. Capital Gains and losses from selling stock or mutual funds? Carrying loss to another year?
There is also (in this State of VA) a form for paying sales tax on Internet purchases that were not charged State tax by the merchant.
You probably want a real Form 1040,not one of the "EZ" forms which don't handle many situations that people with more than a paycheck to paycheck existence have.
It can take a long time to get all of the slips in the mail announcing dividends,qualified dividends and capital gains. You might even have to look some of that up on a website such as "Computerserve" but I think that is also true for people looking for numbers to give to a tax preparer or a "Turbotax" software. Vanguard Brokerage takes a long time to come-end of February?
I suggest making a paper with vertical columns of dividends,qualified dividends and cap. gains. Add them all up more than once with a hand calculator and also with the calculator that is built into your home computer. Make sure they add up to the same thing at least a couple times before accepting the result as correct.
Last edited by Wakefield1 on Sat Jan 07, 2017 9:34 pm, edited 1 time in total.
deikel
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Re: Doing taxes for the first time--Please help!

Post by deikel »

I would suggest to buy yourself a high end copy of turbotax and let yourself guide through the whole thing. Its not really needed in your case, since its simple from what you describe, but going through all the different questions will tell you a lot of how the tax system works and what deductions are out there to benefit from...you might decide to do 2017 a bit different after you have seen the possibilities...

..remember: The Tax code is a way for the government to tell you how to live your life ....follow along where it suits you, will save you...
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livesoft
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Re: Doing taxes for the first time--Please help!

Post by livesoft »

deikel wrote:I would suggest to buy yourself a high end copy of turbotax and let yourself guide through the whole thing. Its not really needed in your case, since its simple from what you describe, but going through all the different questions will tell you a lot of how the tax system works and what deductions are out there to benefit from...you might decide to do 2017 a bit different after you have seen the possibilities...

..remember: The Tax code is a way for the government to tell you how to live your life ....follow along where it suits you, will save you...
That an interesting suggestion. One could do the same thing without cost if they had a friend or family with the software that would let them try it out. Also, aren't the online versions essentially free until one wants to file, so that would be another way to do the same thing without paying the price for "a high end …."
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Wakefield1
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Re: Doing taxes for the first time--Please help!

Post by Wakefield1 »

Does Turbotax require an extra cost version to handle anything much more than plain wage income? Limited to one tax filing online per paid licensed copy?
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BL
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Re: Doing taxes for the first time--Please help!

Post by BL »

Go to
https://www.irs.gov/forms-pubs
and find the forms and instructions:
Pub. 17 booklet
1040
1040 instruction booklet
Schedule C D
Schedule B
form 8949
That is probably all you need this time.
Last edited by BL on Sat Jan 07, 2017 11:22 pm, edited 1 time in total.
RudyS
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Re: Doing taxes for the first time--Please help!

Post by RudyS »

TurboTax Deluxe is fine! (It's middle ground. high end consumer is Premier and absolutely not needed for the OP. I've used it for years and it handles everything OP has, and a lot more.
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Re: Doing taxes for the first time--Please help!

Post by RudyS »

BL wrote:Go to
https://www.irs.gov/forms-pubs
and find the forms and instructions:
Pub. 17 booklet
1040
1040 instruction booklet
Schedule C
Schedule B

That is probably all you need this time.
Also form 8949 and Schedule D for the stock sale. Schedule C is for self-employment, not needed. (Might have been a typo for "D")
pshonore
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Re: Doing taxes for the first time--Please help!

Post by pshonore »

livesoft wrote:May I suggest an even bolder proposal?

Can you do your taxes by reading the Form 1040 instructions and filling out the return with a pencil? That is really the only way you are going to get your first benefit about learning. IRS Publication 17 will get you started. irs.gov has all the forms and instructions, too. Google will find everything.

But after you do that, then you can use tax software before you submit your return by e-file. I will state that tax software actually suppresses any learning. The creators of tax software want you to feel that you don't have to know anything to use their software, so they do not make any attempt to teach you anything.
Or you could use Turbo Tax but instead of going through the interview, use Form Mode and fill out the forms separately. You'll learn how all the forms are related, what goes where, and won't get bogged down with math errors. You can still go through the Interview in case you miss anything.
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BL
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Re: Doing taxes for the first time--Please help!

Post by BL »

RudyS wrote:
BL wrote:Go to
https://www.irs.gov/forms-pubs
and find the forms and instructions:
Pub. 17 booklet
1040
1040 instruction booklet
Schedule C
Schedule B

That is probably all you need this time.
Also form 8949 and Schedule D for the stock sale. Schedule C is for self-employment, not needed. (Might have been a typo for "D")
Yes, you are correct.
It is possible that with single entry, it may not require all of these. Still, good to look at.
sonosoldi3112
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Re: Doing taxes for the first time--Please help!

Post by sonosoldi3112 »

hello

I was in same position as you and had no problems at all with TurboTax ( I prefer desktop download ) as you get forms mode and can see all that you do as you work through the return. Also it will import everything next year so no need to do as much typing. Basic details and any loss carryover will happen automatically and you can save each year return and compare them side by side on your pc screen if you wish. I tested them all and TurboTax was way way better in my opinion ... I had stocks property tax Social Security ect all the usual items plus KIT trust income. Very very easy .... look at your last few year returns and then compare your TT return to them and you will see and learn .. and reconcile your TT return with your prior year ones.
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Re: Doing taxes for the first time--Please help!

Post by grabiner »

livesoft wrote:May I suggest an even bolder proposal?

Can you do your taxes by reading the Form 1040 instructions and filling out the return with a pencil? That is really the only way you are going to get your first benefit about learning. IRS Publication 17 will get you started. irs.gov has all the forms and instructions, too. Google will find everything.

But after you do that, then you can use tax software before you submit your return by e-file. I will state that tax software actually suppresses any learning. The creators of tax software want you to feel that you don't have to know anything to use their software, so they do not make any attempt to teach you anything.
I agree with both parts of this. It's worth understanding taxes yourself, so that you can find if you or the tax software makes mistakes. I have had several times that I entered something in the wrong place, and caught the error only because I knew what to expect and the final numbers didn't make sense (for example, reporting the same dividend as earned in two different states). And i have also found several bugs in the tax software. But I still use the software because it gets the math right, and won't copy the wrong number; I then check the forms by hand for data entry issues and bugs.
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Re: Doing taxes for the first time--Please help!

Post by epictetus »

i used a computer program for years to do our taxes.
several years ago i did them using pencil/paper and found that method was much quicker and easier and i have been using paper/pencil since then.

once you do your taxes once/twice using paper you will have a good sense for where everything goes, what impacts what else, etc.

all the forms and instructions are on the irs website.

so i would second the suggestion to do them using paper/pencil
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OutInThirteen
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Re: Doing taxes for the first time--Please help!

Post by OutInThirteen »

livesoft wrote:May I suggest an even bolder proposal?

Can you do your taxes by reading the Form 1040 instructions and filling out the return with a pencil? That is really the only way you are going to get your first benefit about learning. IRS Publication 17 will get you started. irs.gov has all the forms and instructions, too. Google will find everything.
I've done my own taxes by hand with pencil and paper ever since 1974, but in the last ten years have been using an Excel spreadsheet as the year progresses to capture/project the numbers, then finalize after all year-end information is available as a last check. There's only one year that (as far as I know) I made a mistake, called to my attention by the IRS via a letter - the year my income was first too high to claim education expenses for our two college age sons. My youngest son, with my help, started the same way. My oldest son has his taxes prepared by a CPA primarily due to two rental properties and stock options through his employer.
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F150HD
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Re: Doing taxes for the first time--Please help!

Post by F150HD »

ForeverInvestorILL wrote:I've been doing a lot of reading about different tax prep software (TurboTax, TaxAct, HR Block) and all of them seem pretty similar in terms of price/service Does anyone suggest using one of these services versus the others?
didn't see your State return mentioned. With H&R you need to purchase the State program separately, if you choose to use it.

https://www.amazon.com/Block-Software-D ... B01MDO3TEG

Edit: TurboTax left out the Schedule C, D, E (?) some years back? created an uproar from folks who were religious users. Guessing they fixed that?
http://www.moneytalksnews.com/many-turb ... heres-why/
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ForeverInvestorILL
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Re: Doing taxes for the first time--Please help!

Post by ForeverInvestorILL »

sonosoldi3112 wrote:hello

I was in same position as you and had no problems at all with TurboTax ( I prefer desktop download ) as you get forms mode and can see all that you do as you work through the return. Also it will import everything next year so no need to do as much typing. Basic details and any loss carryover will happen automatically and you can save each year return and compare them side by side on your pc screen if you wish. I tested them all and TurboTax was way way better in my opinion ... I had stocks property tax Social Security ect all the usual items plus KIT trust income. Very very easy .... look at your last few year returns and then compare your TT return to them and you will see and learn .. and reconcile your TT return with your prior year ones.
Hi Sonosoldi, I appreciate your response. What form of TurboTax do you use? From looking at their website it looks like I would need Premier (as I have stock losses). If I were to choose that it would be about $100 for federal and state returns. Is it worth it in your opinion? One of my biggest fears about doing it by pencil/paper is that I will make a mistake or not know where to input a certain figure and TT would basically do it for me.
livesoft
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Re: Doing taxes for the first time--Please help!

Post by livesoft »

^This is the kind of marketing that TT is pushing on unsuspecting taxpayers. With a loss in stocks, you do not need Premier. I definitely used Deluxe desktop with no issues with selling investments with losses. I have been told that even TT Basic does all this.
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Re: Doing taxes for the first time--Please help!

Post by triceratop »

grabiner wrote:
livesoft wrote:May I suggest an even bolder proposal?

Can you do your taxes by reading the Form 1040 instructions and filling out the return with a pencil? That is really the only way you are going to get your first benefit about learning. IRS Publication 17 will get you started. irs.gov has all the forms and instructions, too. Google will find everything.

But after you do that, then you can use tax software before you submit your return by e-file. I will state that tax software actually suppresses any learning. The creators of tax software want you to feel that you don't have to know anything to use their software, so they do not make any attempt to teach you anything.
I agree with both parts of this. It's worth understanding taxes yourself, so that you can find if you or the tax software makes mistakes. I have had several times that I entered something in the wrong place, and caught the error only because I knew what to expect and the final numbers didn't make sense (for example, reporting the same dividend as earned in two different states). And i have also found several bugs in the tax software. But I still use the software because it gets the math right, and won't copy the wrong number; I then check the forms by hand for data entry issues and bugs.
I third this. I would only add that doing taxes by hand while reading the instructions and IRS publications helps you understand at a rigorous level. But the biggest lesson I learned (which I had not learned from using my dad's custom excel sheet) was that taxes aren't something you do at the end of the year and that's the end of it; no, it's that ones choices over the entire year affect ones tax return and each line corresponds to one part of your life. Perhaps a simple lesson but one I was grateful to have. Even as my taxes become more complex I want to keep figuring my taxes by hand so I understand the implications of all investments and income streams.
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Cosmo
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Re: Doing taxes for the first time--Please help!

Post by Cosmo »

livesoft wrote:May I suggest an even bolder proposal?

Can you do your taxes by reading the Form 1040 instructions and filling out the return with a pencil? That is really the only way you are going to get your first benefit about learning. IRS Publication 17 will get you started. irs.gov has all the forms and instructions, too. Google will find everything.

But after you do that, then you can use tax software before you submit your return by e-file. I will state that tax software actually suppresses any learning. The creators of tax software want you to feel that you don't have to know anything to use their software, so they do not make any attempt to teach you anything.

I like this idea. Especially since it has been a while since I last did this (2008-2009 ish). Will be doing this again this year.

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RudyS
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Re: Doing taxes for the first time--Please help!

Post by RudyS »

Agree with livesoft (above).TurboTax Deluxe is entirely adequate, despite what their marketing info suggests about extra help with stock sales, etc.with Premier. Deluxe does all you need.
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teen persuasion
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Re: Doing taxes for the first time--Please help!

Post by teen persuasion »

What about the IRS free file option (after paper & pencil)? OP mentioned his income was $42k, under the $64k income eligibility max for free file. I've been using this option for e-filing for years. I do it on paper first, then run it thru SW so I can e-file for free (after I approve that the SW answer matches mine). I really dislike the Q&A format; it seems to take longer than going directly to the appropriate sections on the forms. I'd use the fillable forms for federal, but my state is backwards in that arena - they only have a few forms available in that format. Notably missing are any forms relating to children (CTC, EITC, college credits). It seems the state has done away with fillable forms altogether this year. :oops:

One caveat - this is free for federal, but may not be free for your state. I learned the hard way to search my state's tax website for their version of free file. You must follow the link from their site for it to be free on both federal and state.
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Re: Doing taxes for the first time--Please help!

Post by pshonore »

RudyS wrote:Agree with livesoft (above).TurboTax Deluxe is entirely adequate, despite what their marketing info suggests about extra help with stock sales, etc.with Premier. Deluxe does all you need.
And so does Basic although with up to $15 off MSRP this week, you might as well go with Deluxe.
Katietsu
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Re: Doing taxes for the first time--Please help!

Post by Katietsu »

Myfreetaxes.com

Totally free tax preparation and efiling of both federal AND state returns for those who meet the income guidelines. Sponsored by the United Way. Last year they used the H & R Block online program. The software link is not available yet for tax year 2016 so can not see which software will be used this year.
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Re: Doing taxes for the first time--Please help!

Post by dodecahedron »

Katietsu wrote:Myfreetaxes.com

Totally free tax preparation and efiling of both federal AND state returns for those who meet the income guidelines. Sponsored by the United Way. Last year they used the H & R Block online program. The software link is not available yet for tax year 2016 so can not see which software will be used this year.
The MY FREE TAXES link appears to work now--it is apparently HR Block again this year.

http://www.unitedway.org/myfreetaxes/resources/hr-block

I personally use the downloadable version of HRBlock and like it better because it allows me to do more in the forms-based view than the online version, but both are reasonable programs to use.
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Re: Doing taxes for the first time--Please help!

Post by Nowizard »

I suggest TurboTax Deluxe. You have some stock sales and will quite possibly have more in the future. If the goal is learning, I would encourage you to use the questionnaire method where you are led through all possible income sources and deductions. Though you will not have entries in most of the categories, seeing them and looking up definitions of items with which you are unfamiliar will provide structure for your learning about taxation. You might even install a 2015 version which you could obtain from someone who used it or another source for free, enter your data as if you were going to submit it and complete your actual return by paper as has been suggested. If the cost is not a major issue, just purchase the current version.

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Re: Doing taxes for the first time--Please help!

Post by jaxbmw »

I have done my own taxes for almost 50 years. I have been a volunteer AARP tax preparer certified by the IRS for the past 10 years. We do taxes for people in local libraries for free. This is available for all people, not just retirees. We do not do rental properties or small businesses over 10k of expenses.

I think anyone handling their own investments should understand taxes. I would suggest the following approach to begin to acquire tax knowledge.

1. Go to the IRS web site and download forms and instructions for 1040. Only look at the sections that appear to be relevant to you. In a similar fashion go to your state web site to get state 1040 and do the same.

2. Check in your area to see if there is a convenient AARP tax preparation site. You bring your forms in, they sit down with you and do your taxes. Ask them questions based upon your prior reading. They will do both Federal and State returns. If you go this route, when you get home you can go over the forms and refer to the instruction book to see how the forms are completed.

3. If there is no AARP tax prep site, then try to use the free software provided by the IRS. Most states have fill-in forms that you can use as well.

4. As a last resort go out and buy software. The reason I put this last is that they have dumbed the software down to such a degree that you don't really know why at times they are asking questions. You will learn best by getting your hands dirty and going through the forms.

Best of Luck, think of this as a long journey not a one time annual event.
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Re: Doing taxes for the first time--Please help!

Post by The Wizard »

Freetaxusa is cheaper than turbo tax and just as much fun, so maybe try that.
I did my 1040 by hand (pencil) for three decades, so yippee.
But if I was a youngster now, I'd go directly to tax software, no pencil.
But read Pub 17 completely just to smarten up first...
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