If you’re a first-time tax filer, in some ways life will be made easier as young adults are less likely to have complex financial circumstances that would result in hundreds of pages of tax documentation, but it can still be a stressful, time consuming period in life. So, here are a few commonly asked questions and tax filing tips for students and young adults who may be filing their for the first time:
- Do I have to file taxes at all?
The answer to this question rests upon your gross income, your status when filing, your age and whether you are a dependent. If your status is of an unmarried dependent student, and your earned and/or unearned income exceeds a certain limit, then you must file a tax return. Unearned income can include interest, dividends and capital gains.
- If you are classed as a dependent, you cannot claim tax exemptions
When your parents or legal guardians file their taxes, it’s important to know whether your status is as a dependent. The Internal Revenue Service or IRS, state that a dependent must be a ‘qualifying child’ or a ‘qualifying relative’ who meets certain conditions, some of which include age, income or student status.
If you are classed as a dependent, then you are not permitted to claim any exemptions when you file your own taxes, even if your parents or legal guardians don’t claim them either. Most students of the age where they are attending college are classed as dependents, and therefor cannot claim their own exemption.
- Check your mailbox
Come January 31st, you may see your tax forms arriving in the mail, and they should include a W-2 form from your employer and/or a 1099-MISC form from any company in which you were employed as a contractor. You may also receive other forms for interest and dividends earned in bank or investment accounts that are above $10. All forms will be related to income, and in the case of young taxpayers, they will relate to education costs.
- Tax breaks may be available to you
There are standard deductions for single filers of up to $6,350 and if you’re a married couple who are filing jointly, then it rises to $12,700.
Some deductions may even be available without the need for itemizing, such as up to $250 for teachers who have unreimbursed classroom expenses.
- Don’t forget about your state taxes
State tax returns are due at the same time as federal taxes, and as the laws can vary greatly from one state to the next, there may be tax breaks available to you that were not there on your federal return, such as those related to home ownership or vehicles.
- Don’t procrastinate!
Whether you’re a first-time filer or an old hand, timeliness is next to Godliness! Make sure all your forms are correct to the best of your knowledge well in time of the deadline, to ensure that you’re not left floundering at the last minute.
And, if all this seems too stressful for you, no matter how many times you’ve filed your taxes, simply seek professional help in the form of a tax consultancy firm and you’ll be sure to file accurately, in a timely manner and receive all the deductions available to you.