There's a first time for everything—including paying income taxes. Whether you work part time or full time or do gig work, if your income exceeds a certain threshold, you must file federal income taxes with the IRS. Filing your taxes for the first time can feel overwhelming, but following these simple steps can make it easier.
1. Determine Whether You're Required to File
Taxable income includes earned income (such as wages and tips) and unearned income (such as unemployment benefits, taxable interest, capital gains and dividends on investments). In some cases, students may have to pay taxes on grants and scholarships.
At the beginning of the year, employees receive a W-2 from their employer showing their gross income for the previous year. Single filers without children must file if they had a gross income of at least $12,950 in 2022.
If you're self-employed or a gig worker, such as a rideshare driver, and your net earnings for the year were $400 or more, you must pay federal income taxes and self-employment taxes. If you expect to owe $1,000 or more in taxes for the coming year, you'll need to pay quarterly estimated taxes going forward. Any company that paid you $600 or more as an independent contractor during the year must send you a Form 1099 or Form 1099-NEC listing the gross income they paid you that year.
Other forms you may receive showing taxable income include:
- Form 1098-T, showing tuition and other qualifying expenses paid to your school
- Form 1099-G, showing unemployment compensation
- Form 1099-INT, showing interest you earned
- Form 1099-DIV, showing dividends paid to you
- Form 1098-E, showing how much interest you paid on your student loan
These forms must typically be sent to you by the end of January; if you don't receive them soon after that, contact the employer or organization in question.
Ask your parents whether they plan to claim you as a dependent on their taxes. Even if they do, you'll still need to file a return if you had unearned income of more than $1,150 or earned income of more than $12,950. However, don't claim any tax credits that your parents plan to claim with you as a dependent, such as the lifetime learning credit or American opportunity tax credit.
It's sometimes a good idea to file even if your income doesn't meet the IRS thresholds. If you had federal income tax withheld from your wages, made estimated tax payments or can claim tax credits, you might receive a refund, even if you wouldn't normally owe taxes.
Still not sure? Visit the IRS' Interactive Tax Assistant to determine if you need to file taxes.
2. See if You Qualify for Tax Deductions or Credits
Tax deductions and credits both save you money on taxes, but in slightly different ways. Tax deductions reduce the amount of your taxable income; tax credits reduce the tax you owe on a dollar-for-dollar basis. Some tax credits can lower your tax liability to zero or even net you a refund.
Common tax deductions or credits for which new taxpayers may qualify include:
Student Loan Interest Deduction
Check the Form 1098-E you received from your student loan lender to see how much interest you paid in the prior year. Depending on the amount of your loan payments and your income, you might qualify to deduct as much as $2,500 in interest on your taxes.
American Opportunity Tax Credit
If no one else claims you as a dependent, you may be able to claim a credit of up to $2,500 for expenses you paid for the first four years of college. If using the American opportunity tax credit lowers your tax bill to zero, you can get a tax refund of 40% of any remaining credit, up to $1,000.
Lifetime Learning Credit
The lifetime learning credit applies to qualified educational expenses at any post-secondary school accredited by the Department of Education. If you pay these costs yourself, you may qualify for a tax credit of 20% of up to $10,000 in expenses, or a maximum of $2,000.
If you're not claimed as someone's dependent, are 18 or older, aren't a full-time student, and contribute to an employer-sponsored retirement plan or an IRA, you could earn the saver's credit. Depending on your income and tax filing status, this credit is either 10%, 20% or 50% of your annual contributions, up to a maximum credit or $1,000 for a single filer.
Earned Income Tax Credit
If you have earned income of less than $57,414, adjusted gross income (AGI) of less than $16,480 and investment income of less than $10,300, you might qualify for the earned income tax credit (EITC). (Your AGI is your gross income minus any deductions. For tax year 2022, the standard deduction for a single filer is $12,950, which could reduce your income quite a bit.)
As of December 2021, the IRS estimates some 25 million taxpayers had received an average of more than $2,400 in EITC. There are quite a few other criteria; use the IRS's EITC Assistant to see if you qualify.
3. Gather Your Documentation
To calculate and file your taxes, gather the following documents:
- Social Security number
- IRS forms documenting earned income (such as W-2 or 1099 forms)
- IRS forms documenting unearned income (such as unemployment benefits or interest)
- Form 1095-A if you purchased health insurance through the health insurance marketplace
- Documentation of tax deductions and tax credits (such as Form 1098-E or 1098-T)
- Bank account and bank routing number
You'll use this information to fill in IRS Form 1040, the tax return for individuals, with information such as:
- Filing status: Single
- Name, address and Social Security number
- Deductions: You can either take the standard deduction or itemize your deductions by filing Schedule A if the amount you can deduct exceeds the standard deduction
- Taxes already paid (withholding from your paycheck or estimated taxes you've paid)
- Tax credits for which you're eligible
- Taxes owed or refund due
Independent contractors must also complete a Schedule C showing self-employment income.
4. Get Help
Tax preparation software can handle the heavy lifting of filing tax returns. Just input your information and the software does the math, tells you which forms to file and even finds tax credits and deductions for which you qualify. The IRS Free File program lets you use brand-name tax software for free.
If you're an employee with a W-2, filing income taxes is pretty straightforward. For more complex tax situations, you may want to hire a professional tax preparer. In 2021, tax professionals charged an average of $220 for a Form 1040 and $323 for a Form 1040 with itemized deductions, according to the National Society of Accountants. Tax professionals can be worth the expense if they save you money in the long run.
5. Safeguard Against Identity Theft
Identity thieves may use stolen information to file a tax return and claim a refund under your name. To protect yourself:
- Get an Identity Protection PIN (IP PIN) from the IRS. Visit the IRS' online Get an IP PIN tool to set up an IRS.gov account, verify your identity and receive your IP PIN. Returns without the correct IP PIN won't be processed, which helps prevent fraudulent filers.
- Create strong passwords for any accounts related to your taxes, such as your tax preparation software or IRS.gov account.
- Be leery of phone calls, emails or texts claiming to be from the IRS, especially if they ask for payment or personal information.
6. Double-Check Your Return
The IRS has access to your W-2s, 1099s and other tax-related forms, so it's important that the numbers on your return match what's on these forms. Review your return for accuracy before you file. At best, mistakes could delay your refund; at worst, they could trigger an IRS audit.
7. File Your Tax Return
The deadline to file 2022 federal income taxes is April 18, 2023. If you're an independent contractor making estimated quarterly tax payments, that's also when your first payment for 2023 is due.
8. Use Direct Deposit if You're Due a Refund
The sooner you file your return, the sooner you'll get your refund. Set up direct deposit to your bank account to get the funds faster and prevent your refund check getting lost or stolen in the mail.
9. Pay Your Taxes if You Owe
You can pay your taxes on the IRS website directly from your bank account for free, or with a debit or credit card for a fee. Using a credit card that offers rewards or an introductory welcome bonus could earn you some benefits; just make sure you pay it off immediately to avoid carrying a balance. If your tax bill is bigger than your savings account, you can apply for a payment plan.
10. Use Your Tax Refund Wisely
Put any tax refund you get to good use, such as paying down credit card debt or adding to your emergency fund. Don't count on receiving your refund by a certain date and using it to pay bills, however. While most refunds are issued in under 21 days, the IRS warns that delays can occur.
11. Consider Adjusting Your Withholding
Receiving a hefty tax refund may seem like a win, but wouldn't it be better to get that money in your paycheck all year long? Ideally, the amount of tax withheld should match the amount you expect to owe. If you get a big refund, consider submitting a new Form W-4 to your employer to have less money withheld from your paycheck. Were you hit with a huge tax bill? Then adjust your withholding so more taxes are taken out of your wages.
The Bottom Line
If you have any questions about your taxes, the IRS has plenty of resources to help. Once your taxes are in order, take some time to review your credit too. Get a free credit report to make sure your information is accurate and consider signing up for free credit monitoring from Experian. You'll get alerts to changes in your credit report, which can help detect possible fraudulent activity.