Earning income is a BIG step toward independent adulthood – it means you can pay rent, take yourself out to dinner or on a trip, and save for your future. Making money also guarantees one other thing – income taxes.
Filing taxes is pretty much as hard as adulting gets – there are countless forms, deadlines (Tax Day is April 15th), and questions to answer about your income, living situation, and expenses. Let’s break down what you need for all the first-time filers in the room:
- Personal Information – This includes things like your full name, mailing address, social security number, and employment information. If you have moved or changed your name within the last year, you may need to provide both your old and new info. All of this goes into your 1040 – the form you use to figure out your taxable income and file.
- Income Information: Take a look at your last paycheck. Was there a line of deductions for federal and state taxes? That means you can expect a W-2 from your employer between January 1 and February 1. W-2 Forms outline the amount you made at work, what your employer withheld for income taxes, and any other benefits you received. No automatic deductions? As a freelancer or a part-time employee, it’s on you to withhold the right amount of tax and make the appropriate payment at the end of the year. Keep an eye out for 1099s, which document any work you completed, the pay you received, and from which company.
- Deduction and Tax Credit Forms: Depending on a few things like whether you paid tuition, repaid your student loans, or donated to charitable organizations, you may be eligible for tax credits or deductions to your taxable income. These lower the amount of tax you’ll pay (which is always a good thing!). Documents include: 1098-T: Tuition Statements, 1098-E: Student Loans Interest Forms, Form 5498: Retirement Savings Contributions, Form 8960: Investment Income, and Charitable Donation Receipts and/or Certificates.
- Filing Software: When you’re young and just getting started in the real world, chances are your return is on the simpler side. That means, it usually includes a version of the 1040 and not a ton else. For those simple forms (and even if you have a few of the deduction-related forms above) online software is a great option to file. It’s cheap, easy, intuitive, and guarantees you the maximum return. Our favs are H&R Block and TurboTax.
For more information and a step-by-step guide to which forms you need and alllllll the ways to file, check out the Income Tax Playbook on Realworld.