This tax season, like everything else about this year, is unlike any we've experienced. It all feels like new territory. We've grown so used to Tax Day being on April 15th, but with COVID-19 necessitating state lockdowns and extreme financial strain for millions of Americans, the IRS first pushed back the payment deadline and then finally the filing deadline for federal tax returns to July 15th. All states have also pushed back their state tax return filing deadline, but not all have mirrored the July 15th federal date. Virgina, for example, has set their new filing date to May 1st and their new payment date to June 1st.
If you're about to file taxes for the first time in the middle of a pandemic, it can feel particularly confusing and stressful. Frankly, taxes feel complicated even in the best of times. When I first began to file, I mistakenly thought my filing status was “head of household,” since I was living by myself. It made me feel accomplished: I had established a whole household (consisting of just me) and was leading it (“it” being myself) all on my own. Very adult, very cool. Of course, with a little more research I realized that my correct status was “single.”
This early-20s tax haze is a relatable feeling for many, so much so that a major plot point in Broad City’s second episode is all about Ilana doing her own taxes. “I’m gonna be a grown-ass woman and do my taxes for once, without my mommy and daddy,” she says in a tone of exaggerated, self-mocking disgust. She visits an accountant, who tells her that her return comes out to $52 and that his fee is $125.
Maybe what’s wrong is that so many people believe being comfortable doing your own taxes means you’re a Real Adult, and if you’re not comfortable, you’re immature. But taxes can be bewildering to people of any age. There are so many moving parts and complicated instructions to follow — no wonder the tax preparation industry makes billions in revenue every year.
Thankfully, there’s a wide marketplace of tools (many of them free or cheap) that can guide you step-by-step and catch many of the common mistakes first-timers might make. Plus, the younger you are, the more likely it is that your taxes will be straightforward (though, unfortunately, there are plenty of exceptions to that), and because young people are buying homes, having kids, and getting married later in life, if we do those things at all, generally our taxes will stay simpler for longer.
Though Tax Day has been pushed back, you should file as soon as you can, especially if you might be owed a refund or have yet to get your stimulus check. Ahead, we’ve gathered some tips on navigating your first tax season.
What Are Tax Returns?
A tax return is a report of all the income you’ve earned during a tax year. The IRS reviews your report, compares it to the information they have, and either sends you a bill for extra taxes you owe or a refund for the taxes you overpaid. If you work for an employer, they should automatically withhold your state and federal income taxes, as well as social security and Medicare taxes. You can adjust how much they withhold on a form called the W-4, which you should have filled out before you started your job. If you’re self-employed, you have to withhold self-employment tax and income tax yourself. Generally, you have to file both state and federal tax returns every year.
One of the most important things to understand is that the U.S. uses a progressive tax system. That means that not all of your income is taxed at the same percentage. If you’re filing single, a 10% tax rate applies to the first $9,700 of your income. Any money you make over $9,701, up until $39,475, is taxed at 12%. The highest tax bracket is 37%, which is for income earned over $510,301. So if you make $600,000 a year, it does not mean a flat 37% of it will go toward federal taxes — only the last $89,699 of your income will face the 37% tax. The exact amounts for each bracket are adjusted every year for inflation.
Does Everyone Have To File Taxes?
No, not everyone. But it’s not as simple as being exempt if you make under a certain amount.
If you made $12,200 or less in 2019, your filing status is single, and you didn't make over $400 from self-employment, you may not have to file a federal return. It also depends on whether or not you’re claiming any credits or deductions, or have any other special circumstances. You can take this quiz to determine if you have to file this year. Just remember, even if you don’t have to file a federal return, you may still have to file your state return, which has different requirements. You can check your state government website to see what they are.
Some other facts:
• If you moved states during the tax year, you may have to file two state returns.
• The U.S. is one of the only countries in the world that taxes its citizens no matter where they live. So even if you lived and worked outside of the U.S. for the whole year, you still have to file a federal tax return. But you can exclude up to $105,900 of foreign earned income in 2019.
Okay, It Sounds Like I Need To File Taxes. What Now?
First, congrats. Now it’s time to get your info and forms together. First, you’ll need to know your social security number. If you have an employer (or employers) make sure you’ve received a form called the W-2 from each.
If you had some kind of side hustle or were self-employed, you should receive 1099 forms from your clients that show how much you were paid for that work. If you made a net profit of over $400, you’ll probably have to pay self-employment tax. However, this also depends on whether this side hustle was treated as a consistent and intentional business or treated more like a hobby. That’s why if you’re new to taxes and self-employed, it might be a good idea to hire a professional.
Request your forms early, as they could be delayed or lost in the mail. You don’t want to be left scrambling before the April 15 filing deadline. If you have extenuating circumstances, though, you can request an extension.
If you made $69,000 or less in 2019, you qualify for the IRS Free File program. Using one of the software options, you can file your own federal and state returns without paying a cent. And though Free File may not be the best option if your finances are complicated, if your income came from one source and you didn’t undergo any major life changes this year (like owning property or having a child), it’ll probably be a breeze to file taxes on your own.