How to File Taxes in Your Twenties

What You Need to File Taxes

Taxes are related to papers, digital records, and information that you should receive from your employer or clients early in the year – usually in January of the year you will file your tax return. For example, you should receive most forms or data in January 2023 for the 2022 tax return you will file in spring 2023.

Help with Filing Taxes

If you are just starting out in your career, you may not earn enough money to hire a tax professional. However, if you have a complex tax situation and can afford it, you should.

Filing Taxes as a Freelancer

The IRS says you are considered self-employed if you carry on a trade or business, even partially. You might be repairing computers on the side of your regular job, or babysitting on the side and getting paid directly, or selling products. All of these scenarios make you a freelancer or sole proprietor, which can open up a wide range of tax filing and payment requirements.

Self-Employment Tax

Self-employment tax is what amounts to Social Security and Medicare taxes that are withheld from your paychecks when you work for someone else. You pay half the amount, and the employer pays the other half if you work for them.

You May Have to Pay Quarterly Taxes

You must send your estimated taxes on this money four times a year because the employer is not withholding amounts and sending them to you. These payments go toward any income tax that may be due, as well as self-employment tax. The IRS provides Form 1040-ES, Estimated Tax for Individuals, that you should file with your payments. The form includes a worksheet to help you calculate the amount due.

You May Need to File Schedule C with Your Tax Return

These requirements and calculations are based on your net business income – what remains after subtracting your legitimate business expenses from your total gross income earned as a freelancer.

Common Tax Deductions for People in Their Twenties

There are many tax credits and deductions you can claim to reduce your tax liability. Tax deductions reduce your taxable income, so you pay taxes only on what remains. Tax credits are a dollar-for-dollar reduction of your tax bill – what you would owe the IRS if you hadn’t claimed them.

Frequently Asked Questions

What is the deadline for filing taxes?

What is the penalty for late tax filing?

How long after filing taxes do you get your refund?

Source: The Balance

Source: https://www.thebalancemoney.com/how-to-file-taxes-in-your-twenties-5181169