According to Investopedia, one of the top ten tax mistakes people make when filing their yearly taxes is accidentally writing their names or the names of their dependents wrong. Yikes. The IRS can seem like the worst, strictest college professor ever, sending stuff back just because of one simple mistake.
But, don’t let that scare you off of paying taxes for the first time. It’s actually not that hard, and there are tons of free tools online that’ll guide you through every step of the way. So, why do you owe federal taxes? Well, it’s not because “the man” is out to get you. Here’s why.
Why do I owe taxes?
You’ve just gotten your first real job as an independent young hustler. You’re raking in that cash money and then April rolls around and it’s time to file your taxes on your own for the first time (i.e. nobody’s claiming you as a dependent on their taxes, so you’re on your own). And, you’re thinking, “But why do I owe taxes in the first place?”
Well, the whole point of taxes is to raise money for state or federal programs that help enhance or protect the community. This includes things like federal defense, education services, social security, and more. If you live in a state that has state taxes, those’ll go to pay for public schools, maintaining highways, and similar initiatives.
Do I always owe the government?
It’s super important to remember that just because you have to file taxes (anybody who is under 65 and makes more than $12,200 a year has to file taxes), it doesn’t mean you’ll owe taxes. In fact, the majority of Americans don’t owe taxes; over 73% of us get a refund from Uncle Sam.
Most people who work at traditional companies as employees (i.e. not independent contractors or freelancers) actually “pay” taxes to the government every time they receive a paycheck. That’s why your paycheck is never as high as it seems it should be. A portion of your wage gets taken out of each paycheck to essentially “pay” taxes before you file them.
Assuming that the IRS is withholding enough from each of your paychecks, by the time Tax Day rolls around, you’ll may receive a refund like over 70% of all Americans do. Freelancing? That’s a different story. Taxes are not always taken out at the time you receive your paycheck, so it will likely lead to you owing more come tax time.
How do you file your taxes for the first time?
You likely won’t know for sure whether or not you owe taxes or are about to get a big fat refund check until you actually file your taxes for the first time. Remember…spell your name right! And don’t accidentally add an extra 0 onto that annual income.
When you file your taxes for the first time, you may not have many deductions to make or additional forms to add to your tax return. If that’s the case, we suggest using free online tax software. It’ll guide you through literally every step of the way (and help make sure your name is spelled right).
If you make less than $69,000 a year, you’re able to use the IRS Free File software. It’s super easy. You’ll need a few things, though:
- Social security number
- W2s from your employer(s) (this form shows your earned income for the year…but don’t freak out if it looks confusing; when you file for free online, they’ll tell you which box to look at to find the right numbers)
As mentioned, the platform will ask you questions to help you determine if you qualify for exemptions and if you’re eligible for more deductions than you think.
Learn more about taxes
One of the worst feelings when filing your taxes is getting to the end of the form and thinking, “Why do I owe taxes?” No one ever wants to owe taxes, yuck. If you’re preparing to file your taxes for the first time or are wondering how you did everything right and still owe money, check out our course on taxes. We promise to give it to you straight, no BS.