Off the bat, it’s important to understand that not everyone needs to file (or pay) taxes every year. But there are specifics that you should know about either way. The short answer? If you make less than $12,950, there’s a good chance you don’t need to file or pay taxes. However, if you’re self employed, you’ll need to file if you make more than $400. Either way, you probably don’t need to pay taxes unless you make more than $12,950. Let’s take a closer look at what this means for you.
It’s important to note the difference between filing and paying taxes. When you file a tax return, you’re just reporting your earnings information to the IRS. After you file, you may owe money to the IRS, but they may also you money in the form of a tax refund. Tax refunds are more common when you have W-2 income, because money is withheld from your paychecks for taxes throughout the year. Filing a return can help you recoup some money if you paid too much.
The standard deduction for your 2022 taxes (which you need to file by April 18, 2023, or October 16, 2023 if you get an extension) is $12,950. Most people can reduce their taxable income by the standard deduction. So if you make $50,000 per year, people claiming the standard deduction only owe taxes on $37,050 of that income.
It follows that if you make less than $12,950, you can deduct all you income and you won’t actually owe anything. In this case, you actually don’t even need to file a tax return at all, though it can allow you to get a tax refund. If you make more than $12,950, you’ll need to file a return and pay taxes on the remaining amount.
While this is a good rule of thumb, there are exceptions. It’s a good idea to do additional research if you think any special or specific criteria apply to you. For example, if you’re a dependent of your parent(s) or guardian(s), you may need to pay taxes on dividends and interest earned from investments. And if you’re married, the standard deduction is different altogether.
If you have self employment income greater than $400, you’ll need to file a tax return. This doesn’t mean you’ll owe taxes on everything you’ve made, but the IRS still requires you to file - unlike people who only have normal W-2 employment income that you’d get from a typical on- or off-campus job, who only need to file if they make more than $12,950.
Self-employment is common in college, so make sure you keep track of where your money is coming from. Income made from driving for Uber or Lyft, for example, is self-employment income. So is working as a freelance employee.
How to file and pay your taxes
Filing your taxes is incredibly easy. There are plenty of free and paid options online, like TurboTax, TaxAct, and TaxSlayer. All you need is the forms that the IRS will send you in the mail at the start of each year, like your W-2 if you work a normal job as an employee or 1099s from companies you work with as a contractor.
The bottom line
For most people, taxes are less complicated than you might think. That said, there are a lot of special circumstances that might make your tax situation different. It’s a good idea to do a little research online before you do (or don’t) file your taxes. Even if you make less than $12,950, you might decide it makes sense to file a return. There are tons of articles online written by tax accountants that can give you an even more in-depth view of your taxes. And if things seem overwhelming, you can always pay to sit down with a real life tax accountant who can help you figure out what to do.
While your Fizz card doesn’t have much to do with you taxes, both credit building and paying your taxes are important parts of your personal financial journey. When you’re younger, there are parents, guardians, and other adults that help keep everything in line. But they won’t be able to file your taxes and help with expenses forever. It’s incredibly important to learn how to manage things on your own. It’s the key to a successful future, no matter what path you choose.