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The Ultimate Tax Guide for Young Adults

Let’s face it, nobody likes doing taxes, but they’re a necessary evil we have to deal with. While taxes might not have been on your radar when you were younger, you’re now at an age where the responsibility to file them falls in your lap. It’s understandable that you might be feeling overwhelmed and frustrated trying to figure out how to read the forms, or even just figure out which forms you file. 

Don’t get yourself flustered by the upcoming tax deadline. Instead, use this guide as a starting point for understanding your tax obligations and how you can make this burden a little easier on yourself. 

Let’s get started!

Use the Correct Filing Status 

First, you need to find out if you’re considered a dependent. If you’re 19 years old or younger, or a student and 24 years old or younger, you will need to verify with your parents whether or not they are claiming you as a dependent. If they are, you will need to use the dependent filing status on your taxes. Keep in mind that you only need to file taxes if you have your own source of income. 

Otherwise, you will most likely use the single filing status, unless you are married. In that case, you will need to choose between married filing separately or married filing jointly.

Claim Any Deductions You’re Eligible for

One way to reduce your tax bill is with a tax shield. Tax deductions are a type of tax shield that is subtracted from your taxable income, lowering how much you have to pay. Before filing your taxes, make sure to look into the types of deductions you might be able to claim. For example, there is a deduction you may be eligible for if you pay student loans, which allows you to subtract the amount of student loan interest you paid over the last year from your taxable income. 

Make Sure You Count Any Freelance Work You Do

If you freelance, that income is likely taxable. It can be easy to forget about side projects that you’ve done as an independent contractor throughout the year, but it’s important that you make sure it’s all accounted for. 

If you make over $600 from contractor work for a certain client, you’ll be on the line for paying taxes on those earnings. That’s why it’s important to keep records of any freelance work you do and make sure that your 1099 is completed with the client so they can send it to you to turn in when tax season comes. In most cases, people who are used to hiring freelancers will be on top of this, but it’s just as much your responsibility to know your tax obligations.

Plan Ahead 

The Ultimate Tax Guide for Young Adults

One of the worst mistakes you can make is missing the tax filing and payment deadline. To help you prevent yourself from getting into hot water with the IRS, research the tax deadlines and put them on your calendar so you’re prepared well ahead of time. You can even set reminders for different steps in the process to make sure that you stay on track to meet the deadline. 

In addition to knowing when you have to file and pay, make sure you have some money set aside in case you owe taxes—especially if you’ve claimed more allowances on your W-4. The last thing you want to do is get surprised by a large tax bill. Just remember, the less money that’s withheld from your paychecks throughout the year, the more likely it is you’re going to end up owing. 

Always Save Your Records

Holding onto old paperwork might just seem like a quick route to an overcrowded desk. However, it’s highly recommended that you hold onto your tax records for at least three years, just in case of an audit. Instead of keeping the paper filing documents, use a scanning app to create a digital file that you can upload to a safe, cloud-based storage app. That way, you don’t have to worry about clutter or losing your tax returns and you’ll always have them available if you end up needing them. 

While this guide covers the basics, there will likely be a lot of questions that come to mind as you complete the filing process. Don’t be afraid to reach out to a tax professional for help or use an advanced tax software that can help guide you through completing your forms. Once you become more familiar with filing and paying your taxes, you’ll see that you don’t need to dread it as much as you once thought.

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Written by Jordan

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