Being a 20-something can be hard enough as it is—and here comes tax season making it more complicated! For the first time ever you’re completely independent, and learning how to be financially responsible is no easy task. Whether you work full time or go to school, doing your taxes each spring is a task you’re going to have to get used to. So where to start? Let’s take a look at the basics all 20-somethings need to know.
When are taxes due?
Every year, you must file your taxes by April 15th. Your employer will send you all your tax documentation (we’ll get into that below) by January 31st, and you can begin filing immediately. If you can’t make the April 15th deadline, you can file for an extension so you have until October 15th to submit your paperwork. It’s best to file as soon as possible though so you don’t run the risk of incurring late payments or filing fees. If you put it off to the last minute, you won’t have any time to fix mistakes you made on the return!
What do I need to file my taxes?
In order to file your taxes, you need an employer-generated W-2 Form or a 1099-Misc Form. Both of these show your annual income and the amount of taxes that have been withheld from your paycheck. The difference? A W-2 means your employer has already taken taxes out of your income with a 1099 means you’ll probably still have taxes you need to pay. If you held multiple different jobs over the course of the last year, you can only complete your tax return once you have the proper form from each employer.
How can I file my taxes?
There are two ways you can file your taxes: mailing in a paper form or completing the form electronically online. As a 20-something, it’s likely you’ll be using a 1040EZ Form to file your taxes because it’s the simplest method. If you’re married, have kids, own a business, or have significant investments, you taxes will get more complicated and you may have to use another form.
Filing your taxes online will typically allow you to receive your refund faster, and many services do the work for you of researching which deductions you’re eligible for. However, filing electronically can cost you money, unlike sending your paperwork in by snail mail.
What is a tax deduction?
A tax deduction lessens the amount of income you have that can be taxed. A deduction doesn’t take money away from you, it simply lowers your annual income on tax forms so you can (hopefully) pay fewer taxes. Deductions can be taken for all sorts of things, such as charitable donations, moving expenses, and student loan interest. The more deductions you can take, the less taxable income you’ll have, and the more money you’ll get to keep for yourself.
How will I get my tax refund?
The IRS will either mail you a check with your total tax refund amount or directly deposit it into your bank account if you chose that option on your paperwork. Note that they can only direct deposit into an account in your own name, your spouse’s name, on in a joint account. Most refunds are issued within 21 calendar days, and you can use it however you’d like!
See, that’s not so bad. Once you get a few years of practice under your belt, filing a return will be a piece of cake!