For first-time tax filers, navigating tax season can feel overwhelming. From deciphering IRS forms to understanding deductions and credits, there’s a lot to learn. But thanks to advancements in technology, filing taxes is easier and more accessible than ever before. Many companies are at the forefront of using artificial intelligence (AI) and digital tools to simplify the process, making it possible for inexperienced filers to feel confident.
If you’re preparing to file your taxes for the first time, it’s important to understand the fundamentals of filing taxes and familiarize yourself with how technology can streamline the process. Here are a few points to consider.
Who Needs to File?
If you earned income during the tax year, you might be required to file a tax return. For most individuals, this threshold is determined by their income level, filing status, and age. If you earned more than the standard deduction amount for the year, you’ll likely need to file.
Additionally, if you received freelance or self-employment income, you’re typically required to file if your net earnings were $400 or more. While this is a relatively low threshold, it’s important to be aware of it.
But even if you’re not required to file, there could be benefits to doing so, including potentially getting money from the IRS for certain tax credits that you may be eligible for.
Essential Documents to Gather
The tax filing process begins with collecting important documents. These commonly include:
- W-2s from employers, showing your wages and withheld taxes.
- 1099 forms for non-traditional income, such as freelance work or side gigs.
- 1098-E forms for student loan interest payments.
- Documentation for any eligible expenses or credits, such as education costs or charitable donations.
Staying organized and gathering all necessary paperwork in advance can prevent last-minute stress.
Deductions and Credits
One of the keys to reducing your tax liability is understanding the difference between deductions and credits:
- Deductions lower your taxable income. For example, student loan interest or moving expenses (for eligible military members) may be deductible.
- Credits provide a dollar-for-dollar reduction on your tax bill. Education credits, like the Lifetime Learning Credit, can directly reduce the amount you owe and, in some cases, even generate a refund.
By taking advantage of available deductions and credits, you can potentially lower what you owe or increase your refund.
How Technology is Revolutionizing Tax Filing
AI-driven tools and user-friendly tax software are transforming how people complete their returns.
AI-Powered Tax Assistance
AI enhances the tax filing process by providing smarter and more intuitive guidance for the roughly 50% of Americans who choose to file their taxes. Many online tax filing platforms use AI to analyze user inputs, identify potential errors, and offer suggestions to maximize deductions and/or credits. For example, if you enter an expense that qualifies for a credit, the software may prompt you to apply for the credit to reduce your tax burden.
AI can also help flag common mistakes, such as mismatched Social Security numbers or missing forms, which can lead to delays in processing your return.
Convenient Document Uploads
Gone are the days of manually inputting information from dozens of forms. Modern tax software allows you to upload documents – such as W-2s or 1099s – and automatically extract key details, saving you time and reducing the chance of errors.
Generative AI Experiences
Many platforms also feature generative AI technology that provides real-time guidance as you work through your return. This technology can answer common questions and provide information on specific tax rules, such as how to claim a dependent or whether you qualify for a home office deduction. Generative AI support as part of the DIY tax filing experience offers an added benefit to consumers because it’s specifically programmed to the latest tax code changes, offering greater reliability than performing a web search or using a more generalized AI tool to perform tax-related searches.
Hybrid Support Models
Some companies offer hybrid solutions that combine AI-powered software with live expert support. For example, you can start your return on your own and then connect with a tax pro for a quick review before filing. This offers the best of both worlds: the convenience of digital tools with the reassurance of human expertise.
AI and technology are enhancing the tax-filing experience for both first-time filers and experienced taxpayers.
AI is used to tailor recommendations and provide more specific guidance based on your tax situation. For example, platforms can adjust guidance if it detects that you’re a student, a gig worker, or a new homeowner, ensuring that you don’t overlook relevant credits or deductions. Users can import their prior-year tax return PDFs, W-2s, and other common forms, allowing the system to automatically populate applicable fields. This reduces manual entry and streamlines the filing process.
To ensure a smooth filing process this year, keep these tips in mind:
- File on Time: Avoid late filing penalties by filing before or by the IRS deadline on Monday, April 15, 2025. If you need additional time to file, you may request an extension to file. Keep in mind an extension to file is not an extension to pay taxes owed.
- Stay Organized: Keep digital or physical copies of all relevant tax documents in one place.
- Prioritize Security: When filing online, choose reputable platforms with encryption to protect your personal information. Avoid using public Wi-Fi when submitting your return.
While filing taxes for the first time can seem daunting, it doesn’t have to be. Thanks to advances in AI and digital tax services, the process has become more intuitive and accessible. Companies are offering innovative solutions that combine technology and expert support, empowering filers to complete their returns with ease.
With the right preparation and resources, you can navigate your first tax season smoothly – and handle the entire process with confidence.
