This piece was updated on March 13th, 2017, to reflect 2016 tax information.
We all know taxes can be, well, pretty taxing–especially if you’re young, doing taxes for the first time, and have no idea where to start. So this guide’s for you–the young, tech savvy, digital native who knows five different ways to order pizza without leaving the couch, but doesn’t know where or how to begin filing their taxes. Read all the way through, and while you probably won’t find yourself at 25 sitting on 25 mil, you might save up enough money to buy another pizza (with toppings! zomg) all without ever getting up.
1. What are taxes?!?!
The first step in doing your taxes is figuring out your income. How much money did you make last year?
If you work a regular job, like paper salesman or assistant (to the) regional manager at Dunder Mifflin, you’ll get a form called a W-2. If you’re a freelancer or self-employed, you might get a form called a 1099-MISC. If you’re single and made less than $10,350 in 2016, you probably aren’t required to file, but you still should because you might get a sweet tax refund! If you work a typical job, taxes are taken out of your paycheck during the year so you might be able to get a few hundred back even if you are under the threshold. And if you qualify for tax credits like the Earned Income Tax Credit or the Child Tax Credit, you can’t get the benefits without filing!
2. Call your mother!
You probably told your mom you’d call her yesterday, anyway. Now you have a reason to do so (besides like, kinship and stuff): to see if they’re claiming you as a dependent! If you’re under 24, check with your parents before you file to see if they’re claiming you as a dependent. If your parents claim you it gives them a nice deduction, but you might not be able to access certain credits or get as big of a refund yourself. In order for someone to claim you as a dependent, their financial support has to make up more than 50 percent of your income.
On the flip side, check out the rules for dependents to see if you should be claiming any. Each qualifying dependent reduces your taxable income by $4,050, and can include your kids or qualifying relatives that live with you.
PS: Call your grandma. She misses you too.
If you’ve ever tried to avoid people raising money for charity on the corner but then awkwardly gotten roped into a conversation about why just a dollar a day can help change someone’s life, you already kind of know what a tax deductible donation is.
Deductions are subtractions from your taxable income, and less taxable income means less taxes! And donations are just one kind of tax deduction.
When you file your taxes, you can either choose to take the standard deduction (which is $6,300 for 2016), or you can itemize your deductions for things like donations, state and local taxes, and mortgage interest. But you can take some deductions even if you don’t itemize, including for student loans, tuition, and moving. Let’s toast to the fact that you moved out of your momma’s basement–with a tax deduction!
4. Tax credit$$$
There are these nifty things called tax credits, which basically just give you money if you meet certain requirements. If you’re using a tax filing software, have no fear–the software should automatically figure out what credits you’re eligible for, but it doesn’t hurt to double check!
Higher Education: Also known as Debt U. College is expensive! Luckily, there are a bunch of tax credits to help you out, though you can only claim one of the higher education credits. The American Opportunity Credit is for undergraduate students working at least half-time, and can reduce your taxes by up to $2,500, and get up to $1,000 back in a tax refund. The Lifetime Learning Credit, on the other hand, applies to both graduate and undergraduate students (even if you’re only a part-time student) as well as people in job training programs. The credit is nonrefundable, but can reduce your taxes by up to $2,000.
Working People: If, like Rihanna, you work, work, work, work, work, work, you could qualify for the Earned Income Tax Credit (EITC). The EITC is a super important benefit for working people with low to moderate incomes (meaning lots of #Millennials), and helps make your money go even further. You also get a bonus if you have a qualifying dependent! It’s proven to be one of the most effective anti-poverty programs ever, and, along with the Child Tax Credit (CTC), lifts millions of people out of poverty every year. Right now, you have to be 25 or older to qualify if you don’t have a dependent (and sitting on a little less than 25 mil at 25) and many childless workers can’t access the credit. But advocates are trying to change that, making the credit more accessible! If, like a normal human, you have more than one part of your identity and identify as both low- to moderate-income and LGBTQ, here’s a special guide just for you! #SpecialSnowflake
The Kids Are Alright: Got a kid? Cool. Swell. Congr@s. Here’s a tax credit for you: the Child Tax Credit (CTC). In addition to boosting the economic security of working families, the CTC has long-term benefits for children. Like with the EITC, advocates are working to expand accessibility to the credit, ensuring that it reaches the families who need it the most, like families with young children.
Obama Cares: Because of the Affordable Care Act aka Obamacare, millions more young people have health insurance today than just a few years ago. If you still don’t have health insurance, you might need to pay a penalty–but if you need help paying for health insurance the Premium Tax Credit can help! #ThanksObama. No, seriously. Thanks. Obama.
5. Which tax filing system should get your final rose?
Unless you live under a rock, you’ve probably seen an advertisement or two (or three or four) for TurboTax, a tax filing software. There are about as many tax filing softwares out there as there are contestants on “The Bachelor” (but none as great as you, Rachel). Before picking which software to use, you should keep in mind a few considerations, like how much you make and where you live.
If you make under $64,000 like most Millennials, you’re eligible to use free tax filing software through the IRS’s FreeFile program. Though many filing softwares advertise their “free” services, be sure to check the fine print: many of them only offer their services for free if you meet certain (restrictive) qualifications. And anyone can file their tax return for free online using the IRS’s FreeFile Fillable Forms.
While deciding which tax filing software should get your final rose, also look into your state’s options. In 21 states, for instance, taxpayers can use private software to file some state tax returns, and in 18 states taxpayers have access to free e-filing for state returns, but third-party software cannot be used. Check out your state’s department of revenue page for free filing options for your state taxes.
6. Can you just do my taxes for me?
If you’re reading this and are like “yeah, all this info is cool and all but really I just need someone to do my taxes for me”– have no fear! VITA is here. Who’s VITA? What’s VITA? How? VITA, or Volunteer Income Tax Assistance, is an IRS-sponsored tax preparation service where tax wonks volunteer to help you fill out your taxes if you make at or below $54,000, have a disability, or are a limited English speaker.
Even though VITA generates over $3 billion in returns every year for low-income people, it’s chronically underfunded: a recent analysis showed that VITA needed $25 million in 2015 to serve everyone eligible for assistance, but only received $12 million from Congress. To find a VITA site near you, click here.
For LGBTQ families, filing taxes can be especially complicated and confusing. Even post-marriage equality (#bless), tax preparers and filing softwares often don’t have a full understanding of the issues LGBTQ people face.
Thankfully, the Task Force pulled together this guide to help LGBTQ people navigate the system. Pro tips: the IRS checks your name and gender marker with the Social Security Administration’s database, but you may be able to deduct some of the costs of transition-related care!
8. Still waiting on comprehensive immigration reform?
DACAmented folks, we got you. If you’re DACAmented, United We Dream’s got a whole resource guide just for you. Main takeaways: you’re ineligible for Obamacare, so you don’t have to pay the tax penalty for not enrolling; if you’ve got a Social Security Number, use it; and file your taxes–filing can help your immigration case down the road and the info you share can’t be given to ICE.
Watch out for scams! Every year there are jerks that try to exploit how nervous people get about taxes. But not you! You are smart. You are beautiful. Also call your grandma again and talk to her about scams too. #PSA
10. Is it too late now to turn in an extension?
Is it April 17th and you’re just now reading this amazing, super helpful, wow-I-can’t-believe-how great-this-is guide? Still stressin’ and need more time? File an extension before April 18 (yep, taxes are due on April 18th, not 15th, this year) and you can get a few more months to file. But remember that the sooner you file the sooner you can get any refund$$$!
11. Please don’t audit me
Getting audited isn’t fun: it’s like someone telling you they’re about to put Beyoncé’s “Formation” on and then putting on Dave Matthews instead. No Red Lobster for you. The good news is you’re most likely not going to be audited. But in the off chance you are, low-income tax centers (LITCs) can help!
Rather than offering assistance preparing your taxes, LITCs help lower-income taxpayers who have filed their taxes and are in some sort of dispute with the IRS. If, for instance, you’ve been denied a tax credit you think you qualify for, LITCs can help you navigate the appeals process. Recent numbers show that LITCs helped refund taxpayers $4,304,526 and helped direct or correct $62,026,156 in liabilities (one-seventh Beyoncé’s net worth). Here’s a list of LITCs near you and the income requirements to be eligible in your state.
You did your taxes! Now it’s time to use the money you got from your refund to order a pizza, put on some netflix and start chilling. To speed up the refund process you can set up direct deposit, and track the process on IRS2go!
Generation Progress does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisers before engaging in any transaction.