First-Time Tax Filers: What Teens and Young Adults Need to Know
Mortgages, retirement funds, tax returns—these are strictly adult concerns, right? Hold on to your smart phones, teens, because the reality may shock you.
Some teens and young adults will have to pay taxes this year.
While you’re still considered a minor in almost every respect, the government will treat you like full-fledged adult when it comes to federal income taxes (unless you are self-employed). Luckily, you have until April 18, 2017, to submit a tax return—three extra days this year because the traditional Tax Day (April 15) falls on a weekend, and the following Monday the IRS is observing Emancipation Day. So, take a minute to read this post and find out what you need to do to avoid becoming a tax evader before you’re even allowed to vote.
Here are five tax tips for the first-time tax filers:
1 – Know If You’ll Need To File
If you can be claimed as a dependent on another taxpayer’s return and you’ve had a job—even a part-time one—and earned more than $6,300 in 2016—you’ll need to file. Alternatively, if you didn’t have a job but made more than $1,050 on unearned income (e.g., interest from investments), you will also be required to file. If you don’t fall into either category and area dependent, you are not required to file a federal tax return. However, if you did work at all and had taxes withheld, filing a return is the only way to get a refund. Plus, it’ll serve as a lesson for future returns. We recommend doing it.
2 – Start the Process ASAP
Yes, you have until April 18 to file, but the sooner you get started, the sooner you can receive your refund check. If nothing else, at least begin the process now so you can figure out how much time you’ll need to devote to taxes. This means gathering all the necessary documents, talking to a tax professional or even just researching answers to any questions you might have. This will relieve some of the pressure when it comes to actually filing!
3 – Gather the Necessary Materials
Aside from personal information, which you should already know or have easy access to, you’ll need a W-2 form from each of your employers or a 1099 form if you were a contractor. These summarize the amounts paid to you over the past year and the taxes being withheld from you. The W-2 form is for employees and must be issued by your employer no later than January 31. The 1099-MISC form is for independent contractors and has a January 31 deadline.
You should also gather any additional forms that showed you spent money on a big expense, like education or charitable donations, as that should be noted in your return.
4 – Be Organized
This is a handy tip no matter what you’re doing, but it’s essential when dealing with government agencies that may not be quick to address your concerns. Translation: store any and every document that is related to your job, your money and your taxes in one secure place. It’ll save you time and headaches when you accidentally misplace your W-2 and need to request a new one.
5 – Take Control of Your Money
There is a way to know if you’ll owe money or get a refund. In the simplest terms possible, if you paid more taxes than the government requires, then you’ll get a refund check in the mail or via direct deposit. On the other hand, if you shortchanged the IRS, then you’ll have to fork over additional funds. To determine how much you’re paying in taxes on each paycheck, look at the W-4 form you filled out when you began your job. That thing called “exemptions” is directly related to your money and the amount taken out of your paycheck. Fewer exemptions mean more money taken out of your paycheck. It’ll result in less money on the 1st and 15th of every month, but a better chance of receiving a refund. Claim more exemptions and your paychecks will be heftier—but your chances of owing money come tax season will also rise. You can use our W-4 calculator to estimate your refund or tax due based on your current W-4 form; this can give you a better idea of whether you are claiming the right number of exemptions for your tax situation.
If you’re an independent contractor, you’ll be responsible for taking care of self-employment taxes and income taxes – no one will withhold those taxes or send them to the IRS for you.
If this is your first time filing a tax return, it’s a good idea to consult an adult or even a tax professional to make sure you’re doing everything correctly. If you file electronically and sign up for direct deposit, there’s a chance you’ll get your refund quicker. You’d probably also be happy to know that online tax filing can be free and easy with H&R Block.
There you have it—you’re now one step closer to adulthood. I guess that means you’ll also be cooking dinner tonight, or is that moving a little too fast?
Hopefully this article offered insight for first-time tax filers. Head here for more tax tips.