One of the most confusing tasks to learn as young adult is filing taxes. Usually, taxes are filed due to employment or dependency under the age of 18 for a parent or guardian. As young adults with first jobs, side incomes, and over the age of 18, taxes become an annual responsibility to uphold during tax season, which runs from January to April.
Figuring out how to file taxes, what to prepare, and when to file are best done with guidance from parents or tax consultants and plenty of research. From experience, here are some steps to prepare for filing taxes:
Research methods of filing
When first determining how to file taxes, it is imperative to research various methods for filing taxes because there is more than one way to do so – and at various price points. The most accurate method of filing taxes is through a tax consultant or accountant who understands all the documents and can request specific forms necessary for proper filing. Ideally, the tax consultant gathers all appropriate materials, completes necessary paperwork, reviews with clients what each document reveals, and submits the tax forms to the Internal Revenue Service (IRS) for processing. Tax consultants and accountants vary in price depending on the services they offer and the complexity of all tax statements.
There are also online programs, such as HR Block and TurboTax, that guide individuals through the process of filing taxes. The programs are often straightforward and convenient to use, even for those who have no experience with taxes. Each program serves as a step-by-step guide to help file taxes online. Each program varies in price, but it is usually good to reuse year after year provided the tax filing forms or requirements do not change.
Determine the best filing status
After choosing a method for filing taxes, you will need to determine the best filing status. The filing status will result in the lowest taxable income for the smallest payout or highest refund. There are five different filing statuses, which are: single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with dependent child. If unsure of the filing status, be sure to seek guidance.
Gather the appropriate materials
Filing taxes takes many documents, forms, and materials that provide a personal identity, such as employment history and banking information. After determining the best method of filing taxes and appropriate filing status, there are a handful of helpful materials to prepare before completing the paperwork. Get ready for taxes with the following documents and materials:
Proof of identification (i.e. passport or driver’s license)
Social Security number
All employment payroll forms such as W2, 1095, 1098, and 1099
Current mailing address
Last year’s tax return information (if possible)
Amounts of other income
All dependents/spouse identifications and Social Security numbers
While it may seem taxes are complicated, it is an important responsibility to learn because it will last a lifetime. If it is difficult to meet the tax deadline, there is a way to file an extension. Each year, taxes differ according to income and employment history, but the process remains fairly the same. When in doubt, it is best to consult a professional for proper resources and up-to-date tax laws.