Receiving your first paycheck is a liberating experience, but it is also a big step in the world of financial responsibility. You might also be surprised that your first paycheck isn’t as high as you expect, due to federal, social security, state, and other local taxes.
Some of us don’t think about our withholding taxes until tax season comes in late winter or spring. With a few months away from the IRS tax deadline of April 18, now is a great time to revisit the tax filing process. Here is some useful information to know before you file your taxes for the first time.
1. Your W-4 determines the amount withheld in taxes
The amount of money your employer withholds from each paycheck is determined by the information you provided to them on your Form W-4, the employer’s payroll deduction certificate, at the start of your employment. The W-4 determines your withholding based on your filing status (declaration single / married separately, declaration married jointly or head of household), whether you have multiple jobs or a working spouse, whether you have children or others. dependents and other adjustments (additional income, deductions or additional deductions).
If you are an independent contractor or concert worker, you may have received a Form W-9, or a request for a tax identification number and certification) from your employer or client. In some cases, you may not receive any tax documentation, but you are still responsible for reporting any earned income and must pay estimated taxes to avoid a IRS Penalty.
2. Your employer will send you the year-end tax documents (in most cases)
If you have a job where taxes are withheld, you can expect to receive a W-2 from your employer, usually in January. This tax form serves as a record of the income you received throughout the year and the amount of money withheld for federal, state, local, and other taxes.
For freelancers, concert workers, or the self-employed, you should receive a 1099 or 1099-MISC from multiple employers. Even if you do not receive a tax form, it is your responsibility to report any earnings over $ 400 to the IRS.
In addition to these forms, you will need the following items to report your taxes:
- Your social security or tax identification number
- Other income and interest declarations
- Contributions to the amount of the pension
- Charitable donations
- Study cost
- Medical expenses not reimbursed
- Property taxes
- Federal and state income tax returns for the past year (if applicable)
3. You may be entitled to deductions
You may be able to maximize your tax return by claiming allowable deductions and credits. Deductions and credits allow you to reduce your tax bill or increase your refund.
If you have private student loans and paid interest on them in 2021, you can claim a student loan interest deduction, as long as you don’t exceed the income thresholds. However, given the moratorium on student loans and the interest freeze until May of this year, many students will not be eligible.
Another possibility is that you were eligible for some or all of the, but you received the wrong amount or it never arrived. You can claim your missing money on your 2021 tax return as . “
4. Not everyone receives a tax refund
Even if this is your first time filing your taxes, you’ve probably heard of a tax refund, which is issued when you’ve paid more taxes in the tax year than you did. ‘really owed it. Most Americans receive a refund (for the 2020 tax year, this was 125.3 million reimbursements issued, for an average of $ 2,827 per reimbursement), but in some cases you cannot.
Those who have underpaid their taxes generally do not receive a refund and will be assessed a penalty for underpayment by the IRS. Withholding tax may arise if you are self-employed or have untaxed income (on which you have not paid estimated taxes), if you have received year-end bonuses or stock dividends, if you made a profit on the sale of goods or too little was withheld from your W-4.
Also, if you don’t file a tax return by the deadline, you may have to pay the IRS increasing interest on taxes owed, as well as a late filing penalty.
5. Tax returns are due April 18, 2022, but you should file earlier
Taxes are usually due on April 15, but this year the due date is April 18, 2022. That said, filing your tax return earlier is the safest bet. The IRS announced in a Report in early January that this tax season is also expected to be tough. (Last year, millions of refunds were delayed by months.) The IRS has also noted that e-filing and setting up direct deposit is the best way to ensure you receive your refund quickly.
If no errors are found on your tax return, you could receive your return within 21 days when filing electronically. However, if the IRS system detects an error or possible error, it could significantly delay the time it takes to issue your tax return. The pandemic and the shortage of IRS agents could also have an impact on this timeline.
6. You have options for filing your taxes
However, you can report your taxes manually using IRS Form 1040 and send it to your state tax offices, the IRS encourages taxpayers to file their returns electronically. You can find all relevant forms and instructions online at IRS.gov. Filing by hand can be a tedious process that puts the stress of potential mistakes on your shoulders. Another option is to hire a tax preparer who will help you prepare and report your tax returns by mail.
Over 90% of Americans file their tax returns with online tax software. If you’ve just started your first job and your tax situation is relatively straightforward (or if you earn less than $ 72,000 a year), there are many IRS Free File, where you can complete and submit your returns free of charge. If your income is greater than $ 72,000, if you want to claim deductions or if your tax situation is more complicated, there are plenty of others it’s both efficient and reasonably priced, and many offer access to online tax professionals who can walk you through the process., including
7. You may need to declare state taxes
Depending on where you live, you may need to file state taxes. Many states have their own online tax platforms (usually free). You can also use TurboTax, H&R Block and other online tax tools to file your tax returns; they can import most of the information from a federal return they’ve already prepared, although they usually charge a fee. To verifyto see what works best for you.
Your state income tax filing deadline is probably the same as the federal filing deadline: April 18. There are seven states – Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming – that do not impose income tax. So, if you live in one of these states, you are not required to file a state income tax return.