How to Adult: Taxes Edition

A beginner’s guide to taxes.

I went through the public school system in the U.S., and then attended a well-ranked public state university, the University of Florida. While I learned a lot and grew as a person while getting my education, I realize that there are a lot of things we are not taught in school about being an adult, things you just have to figure out as you go along.

I’d like to write a series of posts about things we all need to know when being an adult in the real world.

To start with, I’m going to address taxes. What is a W4? What is a W2? What is a 1099 and 1040? What are those withholding things I have to put numbers for on my tax forms at a new job? How do I do my taxes?

These are things we are not taught in school. Sometimes, our parents can help, sometimes the new boss at work can help, but these are important things I think we should each know. You should know what affects you and how to understand your taxes.

What is a W-4?

According to the IRS, the purpose of Tax Form W-4 is simple ― it is used by your employer to withhold the proper amount of federal income tax from your paycheck. The IRS recommends that employees submit a new W-4 tax form each year, or any time their personal or financial situation changes (such as marriage, divorce, or the birth of children). Of course, this is required upon being hired at each new position. [Note: In some places, like NYC, it also makes sure that your CITY taxes are being properly withheld from your paycheck.]

On your W4 form, you will need to claim a number of withholding allowances. You can claim zero or any number you want, really. But there can be consequences! Employee-claimed exemptions are used to determine how much of an employee’s pay to subtract from his or her paycheck to send to the tax authorities. The more allowances you claim, the less income tax will be withheld from your paycheck. The fewer allowances you claim, the more income tax will be withheld from each paycheck.

The IRS provides a rough formula for how many allowances taxpayers should claim to have the correct amount withheld from each paycheck: You can claim one allowance for yourself, one for your spouse, and one for each of your dependents. But beware, if you claim too many allowances, you will owe money when you file your taxes, and if you claim too few, you will simply receive it as a refund when you file.

What is a W2?

The W2 form is not something you fill out. It is usually referred to as a W2, but is also officially known as a “Wage and Tax Statement.” It is the form you receive every January from your employer(s) in the entire previous year, showing your full earnings, withholdings, taxes, and bonus/commissions from the year. All employers are required to mail out or make available your W2 by January 31st every year.

Form W2 is always filled out by the employer, not by you. However, Form W2 is not used for contract workers. For independent contractors or freelancers, Form 1099-MISC is used to report your earnings.

What is a 1040?

Form 1040, also known as a “U.S. Individual Income Tax Return,” is what you file for personal (individual) federal income tax returns filed with the IRS by U.S. residents for tax purposes. Your taxes are due to the IRS by April 15th every year. You are required to file both state and federal tax returns, and these are done at the same time.

What do you need to file your taxes?

If you are a single person (or married but filing separately) with no dependents, then you have the easiest taxes!! My stepdad did mine through college when they were still claiming me as a dependent. So when I graduated, I suddenly had to do my own. I went to H&R Block for a couple of years before deciding I wanted to do it myself. It saves me money and it’s nice to be in control of it.

I used TurboTax.com. I have been using them for at least the last 5 years, and I find it to be an easy-to-use and easy-to-follow step-by-step process. It straight up asks you specific questions and you answer them and then fill out the forms by using the numbers directly from your W2, 1099s, or other forms. It calculates your refund (or what you owe!) and you can also e-file your taxes directly through their site. I have had a good experience with it. I’ve heard other tax sites are similar.

Forms you need:

  • W2 or 1099-MISC with earnings from the previous year
  • Your bank will make a 1099-INT available online for you if you’ve earned enough in interest to have to report it.
  • Your student loans will send you a 1098-E form, usually by email, showing your reportable amount of interest that you have paid over the year. (This can get you more of a refund!)
  • Any investment accounts or retirement accounts NOT through your workplace (if you have a 401k through work, it will be reported on your W2 for you) will send you a 1099 form, whether it is a 1099-DIV or a 1099-INT. These show any dividends you received or money you have taken out of these accounts, and tell the IRS if you need to pay taxes on it. These numbers also need to be reported on your taxes.

So, that might seem overwhelming, but you’ll receive all the forms either physically in the mail or electronically, so you don’t have to go get them or anything. And once you have all the forms, it is tax time! You can go visit a private tax practitioner, you can go to a tax company like Jackson Hewitt, Liberty Tax, or H&R Block, or you can do it online yourself using tools like TurboTax, Intuit, TaxAct, and more.

It’s up to you how you do it. If you try to do it yourself online and are uncomfortable with it, simply stop before you file and take your forms to a person to do your taxes for you. You can only file once, but you can stop the process before you complete it and go about it in another way.

I know this sounds like a lot, but once you gather the paperwork and do it yourself once, you’ll see it can actually be pretty easy! TurboTax keeps my information from previous years of filing, and I don’t have to re-input all of my information every time, I just add the new information. Doing my taxes takes about 30 minutes, and I get my refund about 2 weeks later, direct deposited into my checking account.

We didn’t learn this stuff in school! But the information is out there, and I hope you find this helpful!

The specific next installment in this series will be about filing taxes as a freelancer.

I am thinking future topics for this series can include: Personal finances, job searching, job interviews, what business casual/professional dress codes mean, what affects your credit score/what is a credit score, what is a mortgage, how to care for a pet including vet & food expenses, time, etc. Moving cities or neighborhoods as an adult, and making a budget.

Please feel free to give me ideas, suggestions, or criticism on any of this or additional topics!

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Entrepreneur, writer, editor, book coach, cat lover, weirdo, optimist. Author of “Write. Get Paid. Repeat.” & “Concept to Conclusion.” jyssicaschwartz.com

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