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You Got Your First Job, Now What?

Pay your first taxes with confidence!

So you got your first job. Then you felt the disappointment of looking at your first paycheck and seeing taxes taken out. We’ve all been there. Here are a few things you need to know as a young taxpayer.

Dependent. As a high school student, you’re most likely a dependent on someone else’s taxes. There is a rumor that goes around all the time that dependents don’t have to pay taxes. That is not true. If you make less than $3,950 in the year, you will get a full refund when you file your taxes, but they will still be removed from every paycheck.kid working

Withholding. As a young, new taxpayer, you want to try and minimize any possibility of owing more money at the end of the year. Maximizing what is withheld from your paycheck ensures that you won’t owe money. Using a tool like Paycheck Checkup from the IRS can help you hone in your withholdings.

Tips. If you’re working a serving job or something else where you receive tips, your taxes are going to be slightly different than someone who has a wage job (a job paid by the hour). Be sure to set aside some money to pay any taxes you may owe on the tips you reported throughout the year.

Free File. You can use Free File from the IRS to file your taxes online for free if you make less than $70,000. That most likely means you. Unless you have the best high school job ever. Free File takes you to a list of IRS partners that offer free software for you to file with.

Neighborhood job. Even if you’re mowing lawns or babysitting, you still have to pay taxes. This actually gets more complicated since you’re working as an independent contractor. That means you’re going to end up owing a lump sum at the end of the year and you’re responsible for both ends of the payroll tax.

Gifts count. Unearned money like gifts, inheritance, or stocks are counted as taxable income. If your family has given you money, maybe for a birthday or a faith-based event, you should be declaring that as income. There are some exceptions, but you’ll find more information on that with a quick search. Any investment under $1,100 is not taxed for minors.

Numbers. There are a few numbers that you’re going to need when getting your taxes ready. Make sure you have them correct. When you’re hired, you’ll have to fill out a W-4. Make sure you have your social security number correct on there. When it comes time to file your taxes, double-check all the numbers again. If you made a mistake, now is the time to fix it to make sure you get your refund!

State. Don’t forget your state taxes. They’re separate from federal taxes, and you’re obligated to pay your share.

If you have any questions, a good source to check out is IRS Free File. The site takes you to a list of free online tax resources. The IRS website also has an easy-to-search database to find anything and everything you want about federal taxes. Like everything in life, ignorance isn’t an excuse; the IRS doesn’t care if you don’t know. It is your job to make sure you’re informed. Besides keeping yourself out of financial and possibly criminal trouble, you can save a lot of money by knowing about your tax obligations before Tax Day comes.