Help! I am a new parent, how do I do my taxes?
It’s that time of year again when we see people dressed as the Statue of Liberty and are waving signs telling us it’s time to file a tax return. Are you a new parent and you’re wondering how to file your taxes this year? If this is your first time wondering about filing a tax return, or it’s your first time doing it on your own, let us give you a few pointers.
Here at the Community Pregnancy Center our goal is to help new parents and pregnant women to navigate through this new part of adult life. If you aren’t already part of our parenting/prenatal classes, check out Earn While You Learn program to see what other things besides taxes we can help you navigate!
Taxes… first a disclaimer: this article is NOT professional advice, just some friendly tips. Consult a tax professional if needed. Also, this is being prepared in March 2021, and tax rules change frequently. These links are all to IRS official websites and will be updated by them as needed, so click on the links and use the information you find there.
Let’s see if we can answer some of your questions!
Is there an advantage to me filing a tax return?
Most of you are probably required to file a tax return, but let’s start with the good news. Filing a tax return may make you eligible to receive one or more of the following credits: Earned Income Credit, Additional Child Tax Credit, Recovery Rebate Credit, and several other credits. If your baby was born in 2020, you are probably eligible for some of these credits.
Do I have to file a tax return?
The IRS (Internal Revenue Service) of the federal government requires all people who have US earned income (wages) above $12,400 to file a tax return. The amount varies depending on your situation (married, baby was born in 2020, etc…) This link will help you decide if you need to file a tax return.
Is there a penalty if I don’t file a tax return or don’t file it on time?
There is a penalty if you owe taxes. If you don’t owe taxes, you will be missing out on your refund or credits if you don’t file. Filing tax returns on time will be helpful a few years from now when you are trying to get a car loan or a house mortgage and the lender asks for the last 2-3 years of tax returns to verify your income. Think of it as keeping your affairs in order in preparation for that new car or whatever else your future dreams are made of.
Can I do it myself on-line?
YES! And it probably won’t cost you anything. Click here for the IRS link to companies that will let you use their on-line software for free. You will have to input the information yourself. Gather all your W2 slips, SSN for you and baby, your PFD amount and any other income information you received. Log in to the free file method and answer the questions. Allow at least an hour to work through the questions, but it may take less time if you have all the information at hand.
Do I have to be good at math?
No!! The software will do all the math for you!
What if I make a mistake?
If you answer the questions truthfully, there is very little chance for error. And, if an error happens, it can be fixed. Either the IRS will catch it right away and your refund amount will be different than you expected, or they will catch it later and send you a letter in the mail.
Is it hard to do on your own?
It can be scary or feel tedious the first time, but just go slowly through each question, clicking on the help buttons if you don’t understand the question. Most Free File sites will have live-chat features to assist you.
My parents filed for me last year, so can they do that again this year?
If you had a baby in 2020, then NO, they cannot file for you. You will have to file your own. If you are a full-time student still living at home and supported by your parents, and your baby was born in 2021, you might still be able to be listed on your parents’ tax return for 2020, but will have to file your own in 2021 once you become a parent. This link will help you decide if you can still be listed on your parents’ return.
Do I have to file a state tax return as well?
Alaska does NOT require a state tax return. If you moved to Alaska in 2020 or worked in another state in 2020, you may have to file a tax return for the state you moved from.
How much will it cost to get someone to do it for me?
It will cost between $45 and $75 for a basic tax return. Be sure to ask for an estimate before letting someone start as extra costs can add up quickly.
What is the advantage of paying someone to do it?
If you don’t mind spending $75, and the thought of doing taxes just seems too scary, then maybe paying someone else is a good idea. But…. You have already shown us how brave and courageous you are as you tackled labor and delivery and are now tackling the parenting game, so I encourage you to give taxes a try! Think long term about what other things you would like to spend your $75 on and see if that is enough incentive for you to give taxes a try. If you successfully submit your own tax return for the first time, let us know so we can celebrate with you!